State Street’s Global Investor Confidence Index (ICI) decreased to 114.6 in July, down 12.5 points from June’s revised reading of 127.1.
Confidence among North American investors decreased with the North American ICI falling 20.6 points to 122.6, down from June’s revised reading of 143.2. Meanwhile, the Asia ICI rose by 2.6 points to 89.5 while the European ICI fell 2.1 points to 100.4.
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 analysing the actual buying and selling patterns of institutional investors. 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.
“A weaker earnings season in the US and greater uncertainty on the global growth front were the likely factors driving the sharp decline in North American investor sentiment in July,” says Ken Froot (pictured). “However, despite this pull back in sentiment, it is important to note that investors remain largely optimistic as the North American ICI remains still well above 100 level.”
“The rollercoaster ride across China's equity markets and the absence of a definitive Greek bail-out agreement has certainly weighed heavily on risk appetite with our Global ICI slipping by 20.6 points, the largest monthly decline since 2009,” says Jessica Donohue, Executive Vice President and chief innovation officer, at State Street Global Exchange. “While the aggressive response of the Chinese authorities to calm investors nerves seems to have had a net positive affect on sentiment within the region in the month to July 22nd, the continued volatility in equity markets highlights how temporary such measures can be.”