Investor confidence around the world has bounced back from record low December levels, the State Street Investor Confidence Index has revealed.

The index, which is tabulated by State Street Global Markets, provides a measure confidence based on the buying and selling patterns of institutional investors to determine risk appetite.

The January index reveals that global investor confidence increased by 12.1 points to 60.3, from 48.2 in December.

The jump was led by North American institutional investors, whose confidence climbed 21.2 points to 51.8, from December’s record low of 30.6.

The outlook of European institutional investors also improved, as their confidence reading rose 6.7 points to 73.0, from 66.3. Asian investors’ index fell slightly from 86.6 to 86.3.

“The move up in global investor confidence this month is the largest we have seen since August 2007,” commented Harvard University professor Ken Froot, who co-developed the index. “This is perhaps not surprising, with the index having registered a record low in December.”

The index indicates that so far this month, investors have had more appetite for risk than at any point in the fourth quarter of 2008. However, it remains to be seen whether the boost in confidence represents changes in long-term convictions about investing in equities, Froot added.

“The rebound in confidence among North American investors is the most striking thing about this month’s results,” said State Street associates director Paul O’Connell, who co-developed the index with Froot.

“The increase represents a substantial improvement in outlook. While some of the increase is attributable to risk reallocations going into the new year, it may also be true that institutional investors perceive that the risk of systemic collapse has abated somewhat in the wake of recent policy actions.”

IE