GLOBAL - Investor confidence rose 6.5 points in March, from February's revised reading of 91.8 to 98.3, State Street Global Markets said.
The State Street Investor Confidence Index found the increase was most pronounced among North American institutional investors, whose confidence registered at 103, some 10.5 points higher than February's revised reading of 92.5.
Investor confidence also increased among Asian institutional investors, rising 8.7 points to 100.2 from February's revised level of 91.5. It was a different story among European investors however, whose risk appetite declined 15.0 points to 64.3, from the February level of 79.3.
Developed by Harvard University professor Kenneth Froot and Paul O'Connell of State Street Associates, the State Street Investor Confidence Index measures investor confidence on a quantitative basis by analysing 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 is risk appetite or confidence. A reading of 100 is neutral; it is the level at which investors are neither increasing nor decreasing their 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.
"After the declines in February, March saw something of a rebound in confidence and institutional investors were comfortable adding to equity holdings after the pull back in prices that took place between March 3 and March 16," said Froot. "The one dissenting opinion came from European investors, who adopted a much more cautious stance. The ongoing uncertainty around the size and form of the ‘Pact for Euro,' which is part of the comprehensive package to address the sovereign debt crisis as well as electoral uncertainty in Germany, may well have held European investors back relative to their global institutional peers."
O'Connell added: "We see that institutional flows into emerging markets rose slightly this month, while flows into developed markets were lacklustre. Asia remained a destination of choice, despite the supply-chain uncertainty stemming from the tragic earthquake in Japan."
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