Asian institutional investors still cautious

Asian institutional investors continue to be significantly more cautious than their counterparts in North America and Europe, according to the latest State Street Investor Confidence Index for May.

The index increased by 5.1 points to 102.5 from April’s revised reading of 97.4, with the improvement in overall sentiment driven by an increase in the North American index from 95.1 to 104.1 and a more modest increase in the European index from 96.2 to 96.9.

In contrast, the Asian index continued to decrease from 104.6 to 101.1.

Despite the marginal European increase and the continuing caution in Asia, State Street Associates head of Investor Behaviour Research, Rajeev Bhargava said that after 10 consecutive months of readings below 100, global investor confidence was finally picking up steam.

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“Markets continue to anticipate a very gradual course for the Federal Reserve rate hikes, and with hopes for increased infrastructure spending and tax reforms, the North American ICI readings are resonating with the uptick in risk appetite,” he said

However State Street’s Ken Froot said that, looking regionally, the index numbers in Europe were below the neutral 100-level mark, as investors took a pause to reflect on elevated valuations in the region following the strong run year-to-date.

“In contrast, the Asian index has remained in a risk-on environment, perhaps reflecting the superior earnings growth in the region, as well as the falling risk premium in China,” he said.