Global investor confidence up: State Street
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Krystine Lumanta is a journalist with InvestorDaily, a Morningstar publication.
International confidence levels were marginally up, according to State Street's latest Investor Confidence Index (ICI), but investors still remained relatively cautious, a chief economist said yesterday.
The ICI gauges investors' penchant for risk. Based on actual trades of institutional investors, a reading of 100 is neutral, where investors are neither increasing nor decreasing their allocations to risky assets.
It recorded a global reading of 94.0 for July 2012, rising by 0.7 points from June.
At the start of the year, a global reading of 92.4 was recorded for January.
"The Australian sharemarket rose in July, so with that we saw some improvement in confidence, but as we saw with the global measure, I suspect it was a relatively modest one," AMP Capital chief economist and head of investment strategies Shane Oliver told InvestorDaily.
"While confidence was up for July, it's still a long way from suggesting that markets are out of the woods yet and, in a broader sense, it's still kind of shaky as investors are still relatively cautious."
Confidence among both North American and European investors ticked downwards, while sentiment among Asian investors was slightly improved, the research said.
The North American ICI declined 0.6 points from June's revised reading of 93.7 to settle at 93.1, while the European ICI fell 0.5 points from June's revised reading of 102.2 to hit 101.7.
Meanwhile, the Asian ICI was up 0.8 points from June's revised figure of 90.2 to finish at 91.0.
The global economic outlook was "still pretty messy" and likewise for Australia, profit downgrades of local companies were ongoing, Oliver said.
"We're not seeing extreme levels of bullishness anywhere; we're just seeing a slight improvement," he said.
"You'd see the same amongst Australian investors as well. We have seen better markets for June and July, but the market in a broader sense is still well below the highs reached last year and, of course, way below the highs reached in 2007."
There was still a long way to go before investors were happy about the economic state, he said, adding that they needed to see more aggressive action from Europe and some sort of policy action in the United States.
"It's improved a little bit, but from relatively subdued levels, and the broader issue here is that there are a lot of crosscurrents around," he said.
"Investors can see that there's value in the share markets globally, but against that the economic backdrop is still very messy with Europe in recession, the United States slowing down and the ongoing uncertainty about whether China's going to have a hard or soft landing."
The ICI was developed by Harvard University professor Kenneth Froot and State Street Associates director Paul O'Connell to quantitatively measure risk appetite using institutional investors' buying and selling patterns.