April 29, 2008 / 7:38 AM / 11 years ago

Investor risk appetite growing

LONDON (Reuters) - Investor optimism is increasing across the board with risk appetite for equities now neutral and approaching positive levels, UBS said on Monday.

Investor optimism is increasing across the board with risk appetite for equities now neutral and approaching positive levels, UBS said on Monday. REUTERS

The investment bank said its indicators for stocks, fixed income and currencies all showed increased risk appetite last week.

“There has been an unmistakeable return of investor optimism in the last two weeks,” UBS said in its weekly risk note.

Its equity index rose to minus 0.37 from minus 0.93 a week earlier, well within what UBS considers neutral territory.

“We could see a break into positive risk appetite in the coming weeks,” it said.

UBS’s fixed income risk aversion indicator, meanwhile, moved to its lowest level since January 3, before this year’s major equity sell-off.

Its foreign exchange indicator shifted only slightly over the week, but it was in the direction of greater risk appetite.

An increasing belief that the worst of the credit crisis has passed and that central banks will do what it takes to avoid a meltdown in the financial sector has been lifting investor spirits for much of April.

MSCI’s main world stock index has gained around 4 percent in the month and its emerging market stock counterpart is up more than 7 percent.

At the same time, government bond yields have been rising as investors have moved tentatively out of safe-haven positions.

Fund tracker EPFR Global, for example, reported on Friday that money market funds posted modest outflows and global bond funds extended their losing streak to 11 straight weeks in the week to April 23.

It noted, however, that among the gainers were riskier emerging market and high yield debt funds.

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