The Chief Investment Officer Index released by the Financial Services Council (FSC) shows CIO sentiment is improving, but remains weak.

 

The overall rating of CIO sentiment is five for the September quarter, up from minus two in the June quarter. Sentiment in the FSC CIO Index is measured on a scale of -100 to 100.

 

Mr Brogden said: “The FSC CIO Index strongly indicates that investment confidence amongst Australia’s CIOs has bounced back from its negative territory in the June quarter.”

 

“The positive sentiment can be attributed in part to the fact that the Euro crisis has continued for so long without a contagion effect to Australia or China and apparently stronger political will in Europe to keep the euro in tact,” he said.

 

However, he said with some critical economic decisions in Europe due in September, proof that the positive sentiment amongst CIOs can be sustained will be evidenced in the December quarter.

 

In the September quarter, Australia’s CIOs have continued to favour investment in equities over fixed income.

 

The CIOs surveyed by the FSC manage approximately $500 billion of Australia’s $1.8 trillion in investment funds. The majority of those surveyed expect international equities to outperform other asset classes. They also anticipate Australian equities to perform ‘well’ and international and domestic fixed income to perform ‘poorly’.

 

John Brogden, CEO of the FSC said: “The positive sentiment towards international and domestic equities indicates that CIOs are continuing to see them as good prospects for capital growth.”

 

CIO sentiment is also positive for domestic and international property. Both have moved from neutral in the June quarter to positive in September.

 

In the next 12 months, CIOs see the slower growth rate in China as the biggest risk to their investment decisions. In particular, some are concerned that the recent slower growth may indicate a longer-run trend.

 

In the longer term, CIOs see the most significant risk factors over the next five years as the deleveraging of sovereign debt in Europe and US as a precursor to a long period of slow growth, similar to the experience in Japan. There is also some concern that the current slow down in China may be the beginning of a downward shift and a sign of a maturing Chinese economy.

 

FSC’s Chief Investment Officer Index gauges the sentiment of Australia’s CIOs towards the investment environment and what they are investing in.