Confidence rises but investors cautious about systemic risk

The State Street Global Investor Confidence Index (ICI) continued to rise in April, with an increase of 2.2 points to 83.5 points. 

The index increased from March’s revised reading of 81.3 to 83.5 in April. While investor confidence continued to grow globally, the results varied across the regions.

“Despite relative stability in the US banking sector, institutional investors globally remained cautious in April,” said Marvin Loh, senior global macro strategist at State Street Global Markets.

Although North America’s ICI rose marginally by 1.6 points to 75.5, it maintained the weakest regional reading as investors managed the region’s banking sector uncertainty and tightening monetary policy. 

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However, Loh commented: “The April numbers demonstrate a degree of comfort that US bank depositor stress will remain contained and not contribute to broader systemic risk”.

The European ICI decreased by 6.4 points to 111.2 while Asia’s ICI fell by 2.6 points to 89.3. 

“Despite a drop in April, the 112.2 ICI reading for Europe remained at near two-year highs, with this region signalling the strongest level of risk-taking,” Loh said.

Loh attributed the fall in Asian ICI to fading optimism of widespread gains from China’s economic re-opening. 

The Investor Confidence Index was developed at State Street Associates, State Street Global Markets research and advisory services business. 

It measured investor confidence or risk appetite quantitatively by analysing the actual buying and selling patterns of institutional investors. 

A reading of 100 would be neutral; it would be the level at which investors were neither increasing nor decreasing their long-term allocations to risky assets.