Slump Continues for Equity Funds in July, Morningstar Canada Data Show
August 03 2011 - 7:42AM
PR Newswire (Canada)
TORONTO, Aug. 3, 2011 /CNW/ -- TORONTO, Aug. 3, 2011 /CNW/ - For a
third consecutive month, most equity funds in Canada posted
negative returns in July, as the debt crisis afflicting Europe and
now the United States continued to shake stock markets around the
world. Only seven of the 24 Morningstar Canada Fund Indices that
track equity categories posted gains for the month, according to
preliminary performance data released today by Morningstar Canada.
The best-performing fund index was the one that measures the
Precious Metals Equity category, which gained 4.6% in July.
"Precious metals rebounded strongly last month, as concerns about
the U.S. debt ceiling and next moves in the European sovereign debt
crisis were top of mind for investors," said Morningstar Fund
Analyst Nick Dedes. "The U.S. dollar's depreciation against most
major currencies during the month also helped inflate the
dollar-denominated price of gold. The sharp swing back for the
category following a big drop in June highlights its high level of
volatility, particularly when the global economy remains fragile."
Also among the top performers were the fund indices that track
Asian equity funds. The Morningstar Japanese Equity Fund Index
gained 1.6% for the month, as these funds benefited from the yen's
sharp increase relative to the Canadian dollar. Also doing well
were the Asia Pacific ex-Japan Equity and Asia Pacific Equity
indices with gains of 0.9% and 0.2%, respectively. The worst
performer among all fund indices in July was Financial Services
Equity, which lost 5.3%. "Canadian banks continue to face
competitive pressures. We saw declining net interest margins
negatively affect earnings in the second quarter, and some analysts
are expecting to see some weak spots in the third quarter as well.
Meaningful stock price declines were widespread for the major banks
in July," Dedes said. All six fund indices that track domestic
equity categories were in the red for the month of July. Funds that
target smaller-capitalization stocks generally did better than
their large-cap counterparts, which were held back by their
exposure to the major banks, among other things. The Canadian
Small/Mid Cap Equity and Canadian Focused Small/Mid Cap Equity fund
indices posted relatively tame losses of 0.04% and 0.8%,
respectively, while Canadian Focused Equity, Canadian Equity and
Canadian Dividend & Income Equity were down 3%, 3.1% and 3.3%,
respectively. Except for those that focus on Asia, all diversified
foreign equity categories also posted significant losses for the
month. The Morningstar Global Equity Fund Index lost 2.6%, while
the indices that measure the International Equity and U.S. Equity
categories both lost 3.1%. The worst-performing foreign equity fund
index was European Equity, which dropped 4.7%. As was the case in
the two previous months of stock market turmoil, fixed-income funds
had solid returns in July. All six fixed-income fund indices posted
gains during the month, led by the Canadian Inflation-Protected
Fixed Income and Canadian Long Term Fixed Income indices, up 4.1%
and 3.8%, respectively. "Fixed income is another area where
investors tend to flock during periods of uncertainty, and on the
whole, growth levels out of most developed market economies haven't
been all that encouraging. In Canada, however, we've seen CPI
figures climb and Bank of Canada Governor Mark Carney signalled
that a short-term rate hike may come sooner than expected. This
helped push up real return bonds, a source of inflation
protection," Dedes said. For more on July 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 400,000
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. Morningstar also offers investment management services and
has more than $180 billion in assets under advisement and
management as of June 30, 2011. 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/August2011/03/c9001.html
p Nick Dedes, Fund Analyst, Morningstar Canada, (416) 484-7823;
Christian Charest, Editor, Morningstar Canada, (416) 484-7817 /p
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