Global investor sentiment plunged in September, pushed lower by a crisis of confidence in North America.
The State Street Investor Confidence Index fell 3.5 points to 101.4 in September, from August’s reading of 104.9, as sentiment in the United States and Canada took a nosedive amid concerns of the Federal Reserve tapering stimulus and a slowdown in China.
Despite a surge in certainty in Europe and a slight improvement across Asia, albeit from a low base, it was North America’s 7.6-per-cent drop in confidence to 104.5 that had the biggest impact on the index.
European confidence rose 4.7 points to 101.7 and Asian confidence climbed 2.1 points to 95.3.
Jessica Donohue, head of State Street Associates, said the fear of the Fed’s liquidity withdrawal was having a disproportionally large impact in Asia, where investors are also worrying about slower growth in China.
“With the worst of those fears yet to materialise, it will be interesting to see if this sentiment gap diminishes further next month,” she said, pointing out that September’s reading was taken before the Federal Open Market Committee’s decision on September 18 to delay the taper.
The Investor Confidence Index was developed by State Street Associates and Harvard University professor Kenneth Froot. It measures risk appetite quantitatively by analysing the buying and selling patterns of institutional investors.
The index assigns a precise meaning to changes: for example, the greater the percentage allocation to equities, the higher the level of confidence. A reading of 100 is neutral, at which investors are neither increasing nor decreasing their long-term allocations.
