Japanese Equity Funds Sink While Emerging Markets Soar in March, Morningstar Canada Data Show
April 04 2011 - 7:00AM
PR Newswire (Canada)
TORONTO, April 4 /CNW/ -- TORONTO, April 4 /CNW/ - A devastating
natural disaster in Japan, a nuclear crisis, and continuing unrest
in the Arab world created a volatile ride for equity fund investors
in March. However, by the end of the month, the majority of
investment funds in Canada with equity or balanced mandates had
recouped most of their losses and finished with flat returns,
according to preliminary performance data released today by
Morningstar Canada. The month's volatility was nowhere more evident
than in the Japanese Equity category. Before Japan was hit with its
strongest earthquake in history on March 11, the Nikkei 225 Index
was looking at a month-to-date loss of about 1.8%. By market close
on March 15, after concerns about a possible nuclear meltdown at
the Fukushima nuclear power plant caused a massive sell-off, the
index had dropped another 17.5%. It subsequently regained a large
portion of those losses to end the month down 8.2% in local
currency terms. Also affecting performance for Canadian investors
were the movements of the Japanese yen relative to the Canadian
dollar, which followed a path similar to the Nikkei and eventually
lost 1.3% for the month. As a result, the Morningstar Japanese
Equity Fund Index posted a one-month loss of 9.7%, the worst among
all 44 Morningstar Canada Fund Indices by a wide margin. Also
touched by the losses in Japan were funds in the International
Equity category, which on average allocate 16.7% of their assets to
Japanese equities. The Morningstar International Equity Fund Index
lost 1.6% in March, tied for second-worst performance with the
Morningstar European Equity Fund Index. European stocks, which also
comprise the bulk of the assets in international equity funds,
continue to be plagued by uncertainty over high sovereign debt in
several European countries. The best performers among the
Morningstar Canada Fund Indices were the ones that track the
Emerging Markets Equity, Greater China Equity, and Asia Pacific
ex-Japan Equity categories, with gains of 4.7%, 4.5% and 3.9%,
respectively. "Emerging market funds were partly helped by China's
manufacturing growth, which in turn boosted returns on its
commodities and financial sectors," said Morningstar Fund Analyst
Adam Fisch. "In addition, South Korea saw growth in its export
sector, paired with a strengthening of its currency against the
Canadian dollar. Many emerging market stocks faced a quick drop and
steady recovery following the Japanese earthquake and tsunami, and
investors were often best served by holding on to their investments
rather than jumping ship." On the Canadian equity markets, a poor
showing by natural resources companies was compensated by good
results in the financial services industry, leading to a muted 0.1%
gain for the S&P/TSX Composite Index. The nearly 5% increase in
the price of crude oil did little to help the country's largest
players in that sector, with Suncor Energy Inc., Canadian Natural
Resources Ltd., and Talisman Energy Inc. all posting losses in
March. This resulted in a 1.4% loss for the Morningstar Natural
Resources Equity Fund Index. Meanwhile, sector-diversified funds in
the Canadian Equity category posted an average loss of 0.2%.
Overall, 27 of the 44 fund indices had returns ranging from 0.5% to
-0.5%. For more on March 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 380,000
investment offerings, including stocks, mutual funds, and similar
vehicles, along with real-time global market data on more than 5
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/April2011/04/c8731.html
p Adam Fisch, Fund Analyst, Morningstar Canada, (416) 484-7815;
Christian Charest, Editor, Morningstar Canada, (416) 484-7817 /p
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