Investor confidence continues to slide

[HenryTo]

Note that money managers are now at their most pessimistic point since October 1998 - just before semis and tech stocks powered up. This latest rally can run further than any one of us think. Be careful here, bears.
---------------------------------------------------------------------------------
Investor confidence continues to slide

Survey shows confidence index fell 5.5 points in May, reaching lowest level since October 1998.
May 24, 2005: 11:30 AM EDT

LONDON (Reuters) - Global investor confidence slumped for the second month in a row in May to its lowest level since October 1998 amid a flight from risk by U.S. institutions, State Street said Tuesday.

It was the latest of a series of weak surveys showing investor angst as evidence builds of a potential economic slowdown.

The U.S. financial services firm said that its State Street Investor Confidence Index was at 83.9 for the month, 5.5 points down from a slightly upwardly revised 89.4 in April.

It has fallen more than 9 points in two months. For comparison, the index's all time high was 111.2 in February 2001.

"During May the confidence of institutional investors in equity markets fell substantially," said Paul O'Connell, a co-creator of the index with State Street's research arm.

"This was particularly the case for U.S. investors, who have been reducing their exposures to risky assets across their portfolios," he said.

O'Connell noted that confidence among Asian investors improved slightly on the month before.

The index seeks to assess the behavior of thousands of institutional investors whose assets, worth about $9.5 trillion, are administered by State Street as custodian.

Slumping sentiment
Many global equity markets have been struggling this year as the U.S. economy in particular shows signs of slowing at the same time that the Federal Reserve has been raising interest rates.

MSCI's main world index is down around 2 percent for the year so far and fell sharply in both mid-April and mid-May. It has recovered in recent days.

By contrast, demand for U.S. Treasuries has been relatively strong. The yield on the benchmark 10-year bond -- which moves in reverse correlation to prices -- had fallen around 17 basis points so far in May.

State Street's latest report comes as other investors surveys showed similar weakness.

Germany's ZEW economic think tank said Tuesday that German investor confidence fell sharply in May to its lowest level in six months, but could bounce back on news of an early general election.

Investment bank Merrill Lynch (down $0.52 to $54.63, Research) said last week that its May poll of global fund managers had shown the most negative growth expectations since 2001 and indicated a dramatic reassessment of investment strategy was under way.

It said that pessimistic changes in investor thinking in the two months since its March survey had been "truly breathtaking."