North American investors have led a ‘dramatic and unprecedented' decline in investor confidence to a record low, according to State Street Global Markets.
Global Investor Confidence decreased by 17.5 points to 58.2 from a revised September level of 75.7, according to the State Street Investor Confidence Index for October 2008.
Confidence among North American investors fell sharply from 75.1 to 50.8, while European confidence declined by 1.5 points to 79.6 and Asian confidence dipped by just 0.6 points from 87.1 to 86.5.
The index measures investor confidence on a quantitative basis by analysing the buying and selling patterns of institutional investors. The more portfolio space institutional investors dedicate to equities, the greater their risk appetite or confidence, says the survey.
Ken Froot, Harvard professor and survey developer, says he saw ‘broad and important’ reductions of risk across investor portfolios, at times such as the 1997 Asian Crisis and 1998 Russian-LTCM crisis.
“However, even the strong broad-based selling of risk we saw during those events appears small compared with the current outflows.
“The combination of financial crisis along with truly global macroeconomic risk of deep recession has been causing a complete re-evaluation of risk across a wide investment community centred on US institutional investors,” he says.
Paul O’Connell, State Street associates director, says the period measured, 17 September to 15 October, is the largest single reallocation away from risky assets witnessed since the data first became available in 1994.
While equity inflows have collapsed, monthly flows into sovereign bonds hit a record high in the second week of October. Institutional investors have not bought them at such a rapid rate since data begun in 2001, according to the research.
Conversely, any residual faith in decoupling has been shattered, following a savage sell-off in emerging markets, as monthly flows are now languishing in the 4th percentile, it adds.IFAonline
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