The global ICI rose 1.8 points to 94.8 from April’s reading of 93.0, with the primary driver of the gain being increasing confidence in Europe, up 5.6 points to 93.3 from an April reading of 87.7.
However, speaking to InvestorDaily, State Street Asian head of sales, trading and research Jeremy Armitage said that the rising global confidence result masks significant regional differences, not seen since the global financial crisis (GFC).
“The ICI is an aggregate of three different regions and I think one of the things that we've been seeing for the past few months is markets or investors separating,” Mr Armitage said.
“Whereas before we were seeing much more consistency with the GFC – that sort of impacted everybody – now we’re seeing responses change somewhat… and you’ve got different things happening in different parts of the world.”
April was a strong month for the ICI, with North American confidence reaching its strongest level since May 2011. However, it declined in the most recent result by 2.2 points to finish at 102.5.
The survey found that institutional investors across the globe are continuing to allocate to risk assets but at a slower pace than observed in April.
“We came off a very risk-averse period toward the end of last year and then there was a real, very strong rebound in January once it looked like the US political risk was off the table,” Mr Armitage said.
“I suspect now investors are getting closer to where they’d have a more balanced portfolio rather than just unwinding the extreme positions that they put on towards the end of last year to take risk off their portfolios.”
Mr Armitage said a similar reactive approach is currently occurring in the Australian markets as a result of investors re-evaluating short positions held due to the higher dollar.
“We tracked the profitability of those [short] positions in our real money client sector and they’re very profitable so they were correctly positioned for this move,” Mr Armitage said.
“So now what’s happening in the most recent five days, they've actually been buying Australian dollars, so that’s symptomatic of taking profit from this move.
“We’re actually encouraging clients not to run with the momentum trade at this moment and to wait and see if we get a consolidation around this level.”
