Rising Asia insto confidence contrasts with global peers

The confidence of Asian institutional investors bounced upwards during October from September, although it remains in overall negative territory.

The momentum stands in stark contrast to their peers in Europe and North America, who had increasingly negative mindsets according to the latest Investor Confidence Index by State Street.

The US financial services firm’s regional index reported that Asian ICI rose from 84.5 in September to 91.7, streets ahead of the other two regions. The North American ICI fell by two points to 76.8 while that of Europe collapsed by 17.4 points to 92.8. The overall global score stood at 80.1, a drop of 3.8 points. It marked the third month of declining global investor confidence. 

The index, which was designed by State Street Associates and FDO Partners and is released on the last Wednesday of each month in the US, is designed to measure the buying or selling patterns of institutional investors quantitatively, to measure their risk appetite.

Any score below 100 represents an overall negative sentiment and indicates that investors across the world remain generally sceptical of market performance, based on their trading.

Nevertheless, Rajeev Bhargava, the head of investor behaviour research at State Street Associates, said the rise in Asian investor sentiment “possibly reflect[s] the region’s current ability to contain the virus locally”.

Cases across east Asia, in particular, have dropped markedly. Taiwan has gone 200 days without a new case, China reported just 47 new cases on Wednesday (October 28) Indonesia saw daily infections drop under 4,000,

In contrast, Bhargava said aggregate risk appetite fell during October, “and the decline in investor sentiment was seemingly driven by US and European investors as a second wave of Covid infections rose sharply and simultaneously across regions”.

STOCK RETREAT

Stocks in the US continued a three-day fall on Wednesday, with the Dow Jones Industrial Average falling 3.4% as investors continued to fret over the infection rate and dimming prospects of a global economic recovery any time soon.

The US and Europe are witnessing an ongoing surge in Covid-19 cases. On Wednesday, the US registered a record daily total of 80,662 new cases according to news channel NBC, and 500,000 over the past week. That was higher than the previous high of 79,303, set on October 23. It also recorded 996 deaths over the day.

Meanwhile, Germany’s Robert Koch Institute reported that cases in the country rose by 14,964 to 464,239 over the previous 24 hours with 85 new deaths, and the UK reported 24,701 new cases on Thursday (October 29) – with a new study by Imperial College in London suggesting that nearly 100,000 people in total are catching the virus every day.

While investor sentiment as a whole remains underwater, the outcome of the US presidential election on November 3 could help offer investors more certainty in their assessments.

State Street Associates’ Bhargava noted that “it will be important to see if risk appetite steadies regionally on the outcome of the election or whether the rise in Covid infections we are seeing remains a driving force that will continue to impact investors over the next several weeks”.