Anti-globalisation sentiment dents Asian confidence

Political risk weighs on Asian and European investor confidence, but sentiment among US institutions improves slightly.

The outcome of the US election has polarised investor sentiment in Asia and North America, according to the State Street Investor Confidence Index for November 2016.

The “Asian ICI” decreased 4.6 points, while the North American index rose 0.2 points. Confidence in Europe also took a hit, with the index falling 2.6 points compared to October.

“Trump’s victory has clearly exacerbated anti-globalization jitters, while confidence in Europe further declined as the UK’s exit from the European Union and Italian political risk remain a source of major concern,” said Jessica Donohue, executive vice president and chief innovation officer at State Street Global Exchange.

A weakening yuan – US dollar exchange rate has raised concerns in Beijing that money is flowing out of China, leaving the government scrambling to limit the outflow, as reported by sister publication Private Equity International at the end of November.

Investor sentiment is unlikely to improve in the short term, with the Federal Open Markets Committee and European Central Bank meetings in December likely to weigh on confidence over the coming month, State Street said.

The State Street ICI measures confidence or risk appetite by analysing the buying and selling patterns of institutional investors. It assigns a precise meaning to changes in investor appetite – the greater the percentage allocation to equities, the higher risk appetite or confidence.