InvestmentsAug 31 2016

Big investor confidence slides in August

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Big investor confidence slides in August

Institutional investors’ confidence in the markets plunged this month, driven largely by jitters in the US and European regions, according to data from State Street.

The Boston-based asset manager, which measured the buying and selling patterns of big institutional players such as banks, insurers, and pensions, found investor confidence around the world had dropped to 89.7 in August, from July’s revised reading of 98.

Looking specifically at regions, the State Street Investor Confidence Index found sentiment towards the US has dived to 89.5 from 99.8 over the same period.

Confidence towards the European markets had also taken a hit, falling to 86.8 in August from 92.4 in July, while Asia had suffered a 2 point drop.

Kenneth Froot, who developed the index, said it has been an “eventful” summer.

“The poorer than expected earnings season clearly took the wind out of US institutional investors’ sails,” he said, adding this pushed confidence levels in the US markets deeper into the red.

He also said it remains to be seen whether the growing conviction in the US for a rate hike will mark a further round of risk aversion.

A reading of 100 on the index is neutral, and is the level where investors are neither increasing nor decreasing their long-term allocations to risky assets.

These figures from State Street are in stark contrast to research from Lloyds Bank, which said confidence levels among UK retail investors were making a comeback

Timothy Graf, head of macro strategy in the EMEA division at State Street Global Markets, said the recent “melt-up” in risky asset valuations has not been endorsed by institutional investors.

He added: “The exception to this would be the resilient sentiment we see in Asia, perhaps a reflection of receding fears of a hard landing in China.”

katherine.denham@ft.com