GLOBAL - Worldwide investor Confidence fell back below 100 to settle at 99.2 in June, a decline of 5.1 points from May's revised reading of 104.3, State Street Global Markets said.
The decline was most pronounced among North American investors, whose confidence fell 5.8 points to 100.4 from May's revised level of 106.2. Asian investors also reduced their risk appetite with investor confidence falling 3.7 points to 93.2 from a revised May reading of 96.9.
Surprisingly, European investor confidence rose 8.5 points from May's revised level of 79.4 to reach 87.9.
The State Street Investor Confidence Index was developed by Harvard University professor Kenneth Froot, and Paul O'Connell of State Street Associates. It measures investor confidence or risk appetite quantitatively 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 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.
"This month saw the release of a number of indicators that offered further confirmation that global growth has slowed," said Froot. "In the US, policy makers pointed to Japanese supply disruption and elevated natural resource prices as potential culprits, but beyond these concerns there is the prospect of further slowdown in China to consider as well as the difficulties surrounding Greek sovereign debt. Institutional investors have responded to these worries and suspended for now the accumulation of risky assets that they began in May."
"Looking regionally, we see a continuation of the improvement in confidence among European investors that began in March," added O'Connell.
"Cumulatively the European Investor Confidence Index is up 21 points over the quarter, albeit a substantial gain from extremely low levels. A level of 87.9 still signifies risk aversion and the sales of equity positions persist, but European institutions have tempered the pace of such sales recently, perhaps in recognition of the fact that recent price moves have created more attractive valuations in certain sectors."
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