The Global ICI fell by 2.5 points in March to 120.2, according to the State Street Investor Confidence Index (ICI) for March 2014.
The decrease was primarily driven by European institutional investors, with the European ICI falling 1.5 points to 108.6, down from February’s revised level of 110.1. Risk sentiment remained resilient in North America, while confidence among Asian investors increased, with the Asian ICI rising 7.4 points to 114.3 from the February reading of 106.9.
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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.
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.
Froot said: "Geopolitical risk in the Ukraine, Turkey and other emerging markets has yet to have a significant negative impact on institutional investor behavior. Institutions have largely maintained their allocations to equities on a global basis. With no major negative news appearing on the economic front, sentiment remained unaffected during the period."
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By GlobalDataJessica Donohue, senior managing director and head of research and advisory services, State Street Global Exchange, said: "Policy and credit fears in China failed to dampen sentiment amongst Asian institutional investors. Our data suggests that institutions continue to add risk in the region in the face of mounting policy pressures. The People’s Bank of China’s recent move to double the Yuan trading band to allow for greater currency fluctuation, however, reflects policymakers’ commitment to financial liberalization reform."
