MORN Morningstar Inc

TORONTO, Nov. 2 /CNW/ -- TORONTO, Nov. 2 /CNW/ - Equity funds in Canada followed up their strong September showing with another month of positive returns in October, as currency wars pushed global markets higher ahead of the U.S. Federal Reserve's next meeting on Nov. 3. All 24 Morningstar Canada Fund Indices that track equity fund categories produced gains for the month, according to preliminary performance data released today by Morningstar Canada. "Expectations that the Fed will agree on a second round of quantitative easing set the stage for a second month of strong equity gains," said Esko Mickels, fund analyst for Morningstar Canada. "With markets expecting roughly US$500 billion to US$1 trillion in additional bond purchases, virtually all assets felt the impact of the looming U.S. government move to boost its economy by devaluing its assets." Among the winners in this environment were commodities and resources, many of which are priced in U.S. dollars. "Since the market expects that quantitative easing will lead to a further U.S. dollar devaluation, commodity prices were adjusted upward in order to maintain their value," Mickels said. This resulted in the Morningstar Canada Natural Resources Equity Fund Index posting the best return last month among all fund categories with a 5.2% gain. The fund index that measures the resource-heavy Canadian Small/Mid Cap Equity category also did well with a second-place 4.3%, while Canadian Focused Small/Mid Cap Equity ranked fifth with 3.8%. The materials sector was also the main driver of performance for larger-cap domestic equity funds; both the Canadian Equity and the Canadian Focused Equity fund indices gained 2.3% in October, trailing the benchmark S&P/TSX Composite Index's return of 2.7% for the month. The Morningstar Canadian Dividend & Income Equity Fund Index, whose constituent funds are more heavily skewed toward the financials sector, gained 1.6%. Almost all equity markets around the world were up in October as countries battled to keep their currencies low to boost exports and growth. Among sector-diversified foreign equity funds, the best-performing categories were European Equity and U.S. Equity with gains of 3.5% and 3.4%, respectively. The fund indices that measure the International Equity, Global Equity, and Asia/Pacific ex-Japan Equity categories gained 2.8%, 2.4%, and 2.2%, respectively. Among major markets, the only exception to the upward trend was Japan, where the Nikkei 225 Index lost 1.8%. "Japanese stocks fell as the yen's appreciation had investors worried about the competitiveness of Japanese exporters," Mickels said. However, currency effects also worked in favour of Canadian investors, since a stronger yen increased the value of Japanese stocks when expressed in Canadian dollars. The net result was a positive return of 0.8% for the Morningstar Japanese Equity Fund Index—the lowest return among all equity fund categories. For more on October fund performance, go to www.morningstar.ca. Morningstar Canada's preliminary fund performance figures are based on change in funds' net asset values per share during the month, and do not necessarily include end-of-month income distributions. Final performance figures will be published on www.morningstar.ca next week. About Morningstar Morningstar Research Inc. is a Canadian subsidiary of Chicago-based Morningstar, Inc., a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of Internet, software, and print-based products and services for individuals, financial advisors, and institutions. Morningstar provides data on approximately 370,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 4 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. The company has operations in 26 countries. To view this news release in HTML formatting, please use the following URL: http://www.newswire.ca/en/releases/archive/November2010/02/c7871.html pEsko Mickels, Fund Analyst, Morningstar Canada, (416) 484-7815; Christian Charest, Editor, Morningstar Canada, (416) 484-7817/p

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