State Street Markets released its institutional investor indicators today (8th). The State Street Institutional Investor Risk Appetite Index remained in positive territory in May, but retreated notably from the April peak. Market sentiment across almost all asset classes cooled, with only the foreign exchange market remaining broadly stable. Even so, extreme positioning levels stayed elevated, suggesting that although sentiment is gradually normalizing, investors remain confident about the outlook for risk assets.

Over the past month, equity allocation edged up by 1 ppts, mainly funded by cash outflows, while fixed income allocation excluding Treasury bills was broadly unchanged. Overall, institutional portfolio structures remained stable, with only limited reallocation among major asset classes.

Related NewsRANGE TECHNOLOGY (300442.SZ) Reportedly In Talks for HKD20B Loan to Build Sha Ling Data Park
Noel Dixon, Senior Macro Strategist at State Street Markets, said that as of end-May, asset managers’ equity allocation rose to the highest level since 2000. Equity holdings increased by 1 ppts during the month, funded by cash, while fixed income allocations were flat overall. Investors continued to add to US equities, which remain the largest overweight asset. Within the US market, allocations to healthcare, utilities and information technology increased, while allocations to communication services, energy and real estate declined.

In May, sentiment toward European equities remained subdued. The bank’s 20-day net flow indicator stayed in the bottom decile range, with investors still significantly underweight European stocks. Asian equities continued to benefit from the capital expenditure boom in artificial intelligence, with North Asian markets maintaining positive momentum on the back of strong earnings performance and capital inflows.

The bank noted that although multiple US economic data points surprised to the upside, the rates market is still pricing in only one Federal Reserve rate hike within the year, a relatively moderate policy expectation compared with other major central banks. Meanwhile, euro fund flows shifted from net inflows at the start of May to net outflows. Escalating conflict in the Middle East has heightened concerns over Europe’s economic outlook, weakening demand for European assets. In the Asia-Pacific region, buying interest was strongest in the Korean won, offshore RMB and Philippine peso, while the Thai baht, Indonesian rupiah and Malaysian ringgit recorded slight net outflows. (da/u)

AASTOCKS Financial News