Asia defied a global decline in investor confidence about the future direction of markets, according to a measure that plots the buying and selling habits of market players.
Uncertainties about the outcome of the November 3 US elections and heightened concerns about a second wave of COVID-19 hit global investor sentiment in October, with the notable exception of Asia, according to a monthly barometer of investors’ buying and selling habits from State Street.
State Street’s Global Investor Confidence Index fell to 80.1, down by 3.8 points from September’s revised reading of 83.9. The European index logged a heavy drop, down 17.4 points, to 92.8. The North American ICI fell by a more modest 2.0 points to 76.8. Meanwhile, the Asian ICI increased to 91.7 from 84.5.
The index measures investor confidence or risk appetite by analyzing the actual buying and selling patterns of institutional investors. A reading of 100 is neutral; it is the level at which investors are neither increasing nor decreasing their long-term 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.
“Aggregate risk appetite slipped in October, and the decline in sentiment was seemingly driven by US and European investors, as a second wave COVID infections rose sharply and simultaneously across regions, again elevating concerns about growth,” Rajeev Bhargava, head of investor behavior research, State Street Associates, said. “Interestingly, Asia witnessed a bounce in investor appetite, possibly reflecting the region's current ability to contain the virus locally.”