Index records increased confidence among Asian investors in September

Overall global sentiment rose.

State Street Global Exchange recently released the results of the State Street Investor Confidence Index (ICI) for September 2015.

According to a release from State Street, the Global ICI rose to 116.6, up 7.2 points from August’s revised reading of 109.4.

The improvement in sentiment was driven by an increase in the North American ICI from 120.6 to 133.2.
Confidence among Asian investors rose by 5.4 points to 97.8, while in Europe the ICI also increased to 95.7, up 2.2 points.

The Investor Confidence Index was developed by Kenneth Froot and Paul O’Connell at State Street Associates, State Street Global Exchange’s research and advisory services business. It measures investor confidence or risk appetite quantitatively by analyzing the actual buying and selling patterns of institutional investors.

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The index assigns a precise meaning to changes in investor risk appetite: the greater the percentage allocation to equities, the higher risk appetite or confidence. A reading of 100 is neutral; it is the level at which investors are neither increasing nor decreasing their long-term allocations to risky assets.

The index differs from survey-based measures in that it is based on the actual trades, as opposed to opinions, of institutional investors. “In September, all eyes were focused on whether the Fed would lift rates or not,” commented Ken Froot.

“In the current environment of elevated tail risk, indications that the Fed is embarking upon a more shallow rate hiking cycle should help both alleviate market volatility and stabilize global growth outlook, and this has been reflected in sentiment more broadly this month.”

“Emerging markets are grappling with a range of headwinds constraining their growth,” added Jessica Donohue, executive vice president and chief innovation officer, State Street Global Exchange. “A delayed rate hike extends the loose monetary policy environment, easing concerns over EM.”