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1. 15 Jul 2015
Rising Pessimism among Financial Investors
Ever since the start of the global financial crisis in 2007, financial investors have remained tense as they experienced various shocks
and uncertainties caused by low oil prices, the anticipated reversal of US monetary expansion (causing shifting capital flows) and
turbulence within the Euro Area. As investor sentiment plays a critical role in driving market movements especially in times of volatility,
increased attention has been placed on data which reflect the economic expectations of financial market participants – the Sentix
Economic Indicator being one of these.
The Sentix index is a monthly survey of more than 4,000 private and institutional financial market investors on their assessment of the
current economic situation and their expectations over the next six months. The index has a worldwide coverage and the results are
published based on six economic areas, namely the European Union, Eastern Europe, US, Japan, Asia excluding Japan and Latin
America. A global aggregate is derived as a weighted average of these six categories and weights are based on the relative shares of
global GDP. The indices can fluctuate from -100 (meaning very bad or strongly deteriorating) to +100 (very good or strongly improving).
The Sentix index covers both private and institutional financial market participants and each receives equal weights in the formation of
the overall index. Apart from the assessment of overall economic activity, the index also provides data on the sentiment of financial
investors towards initial public offerings (IPOs), commodity and real estate markets, thus extending the scope of the index to provide
sentiment towards specific market segments. The Sentix index is considered as the main source identifying the expectations and current
sentiment of financial market participants, therefore providing analysts and policymakers with useful insights of, and importantly trends in,
investment preferences.
The latest Sentix world index covering July 2015 shows deteriorating economic sentiment in all three sub-components with the average
of the current situation and expectations decreasing by 2.8% on a monthly basis, to reach 14.2 points. The value is still above zero,
suggesting that the majority of investors surveyed remain positive concerning the world economic situation. The drop in the overall index
was mostly driven by a 3.1-point plunge in the six-month expectation index from May to July, reflecting increased pessimism among
investors regarding the future. This is not surprising, given the exacerbation of the unstable situation in Greece which increased the level
of uncertainty among financial market participants. The IPO barometer index measuring the sentiment among investors towards global
IPO activity plunged to -26 points, falling by 23.8% on a monthly basis and by 15.6% compared to June 2014. Among others, the
commodity barometer and the real estate sentiment indices also decreased in June 2015. The most pronounced drop was recorded in
the commodity index falling substantially from zero points in May to -8.5 points in June. All major world indices suggest increased
pessimism among investors and the uncertainty they face.
WorldTrend Database
+ Aggregate: World
+ Business and Economic Survey
+ Table WD.Sentix: Economic Indicator: World
View and work with all of these series and many more relevant to this topic, using a single CDM work file. Please
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On a regional level investor sentiment shows varying signs in July 2015, with the
US and Japan leading the positive outlook. Across Europe investor confidence
increased in July 2015 compared to the previous month, by 8.3% (to reach 18.5
points) in the EU, but decreased by 66.1% (to -5.1 points) in the Eastern
European countries. Institutional investors considered the economic situation in
both regions worse than a month ago. A decrease in confidence was also
observed in Latin America and Asia, excluding Japan. The drop in investor
sentiment in the latter can be largely explained by the slowdown of the Chinese
economy and the bleak prospects facing the other emerging countries in the
region.
Conversely, the overall index in the US rebounded from the large drop recorded in
May 2015. Currently it stands at 24.4 points, increasing by 16.9% since June.
Unarguably, US investors remained broadly positive on the economic situation,
although expectations for the next six months are not as optimistic as current
sentiment.
The Sentix expectations index has largely decreased during the past few months
alongside the indices covering the individual economic activities such as the IPO,
Commodity and Retail trade barometers. The drop in investor confidence is a
clear sign of the uncertainty faced by the financial market industry and their
conservative assessment for the future of the global economy.
Contributed by Petar Chavdarov, CEIC Analyst
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+ WorldTrend Database
+ Aggregate: World
+ Aggregate: Euro Area and European Union
+ Aggregate: Eastern Europe
+ Aggregate: Asia
+ Aggregate: Latin America
+ Business and Economic Survey
+ Table: Sentix Economic Indicator
+ Global Database
+ USA
+ Japan
+ Business and Economic Survey
+ Table: Sentix Economic Indicator
+ WorldTrend Database
+ Aggregate: World
+ Aggregate: Euro Area and European Union
+ Aggregate: Eastern Europe
+ Aggregate: Asia
+ Aggregate: Latin America
+ Business and Economic Survey
+ Table: Sentix Economic Indicator
+ Global Database
+ USA
+ Japan
+ Business and Economic Survey
+ Table: Sentix Economic Indicator
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