Equity Funds Surge Ahead in October, Morningstar Canada Data Show
November 02 2010 - 7:00AM
PR Newswire (Canada)
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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