Europe Leads Equity Funds Down in August, Morningstar Canada Data Show
September 02 2011 - 7:00AM
PR Newswire (Canada)
TORONTO, Sept. 2, 2011 /CNW/ -- TORONTO, Sept. 2, 2011 /CNW/ -
Equity funds suffered the worst of their now four-month-long slump
in August, as weak economic data and a historic debt downgrade in
the United States pushed world markets downward. All but one of the
23 Morningstar Canada Fund Indices that track equity categories
posted losses for the month, with 12 of them losing more than 5%,
according to preliminary performance data released today by
Morningstar Canada. The worst-performing fund index was the one
that measures the European Equity category, which lost 8% in
August. "The tribulations in Europe started a few years ago with
the peripheral countries of Iceland, Ireland and Greece. Now there
is fear that troubles may be spreading to the core as Italy and
Spain came under pressure, prompting the European Central Bank to
step in and purchase the government bonds of these countries," said
Morningstar Fund Analyst Salman Ahmed. "These fears worsened when
Germany, considered the stalwart in the region, released
disappointing GDP growth numbers due to a slowdown in exports,"
Ahmed said. Germany's DAX stock index lost 19.2% for the month,
while major indexes in France (CAC 40) and the United Kingdom (FTSE
100) lost 11.3% and 7.2%, respectively, when measured in local
currencies. For Canadian fund investors, these losses were tempered
by currency effects, with the Canadian dollar depreciating against
both the euro (2.6%) and the pound sterling (1.4%). Things weren't
much better on this side of the Atlantic, where the S&P 500
Index lost 5.4% in August. "There was a sharp decline at the start
of the month due to consistently poor economic news and an
unprecedented downgrade of U.S. debt by rating agency Standard and
Poor's from the AAA to AA+. This prompted the Federal Reserve to
commit to two years of low rates to try to help markets. Investors
reacted positively to the news, but markets still ended this
volatile month deep in negative territory," Ahmed said. Canadian
investors in this segment once again benefited from the weakening
loonie, which dropped 2.5% against the U.S. dollar, and the
Morningstar U.S. Equity Fund Index closed the month with a 4.8%
loss. Among the major diversified foreign equity categories, the
Morningstar Global Equity Fund Index lost 5.5%, while the indices
that measure the Asia Pacific Equity, Emerging Markets Equity and
International Equity categories lost 5.2%, 6% and 7.4%,
respectively. Domestic equity funds generally outperformed their
foreign counterparts, with the Morningstar Canadian Equity Fund
Index posting a relatively tame 1.9% loss for the month. This
result reflected both a sharp drop in one of Canada's major
sectors—energy—and a significant gain in another: materials. The
S&P/TSX sub-index that tracks the latter sector gained 5.1% for
the month, boosted by solid performances from the major gold
producers. The best performer among the 43 Morningstar Canada Fund
Indices—and the only equity-based index with a positive return—was
the one that tracks the Precious Metals Equity category, which
gained 4.8% in August. Only four other fund indices produced gains
for the month, all of them tracking fixed income categories, with
returns ranging from 0.5% to 1.7%. "As is usually the case during
times of market uncertainty, investors flocked to the safe havens
of gold and government bonds," Ahmed said. For more on August 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/September2011/02/c8148.html
p Salman Ahmed, Fund Analyst, Morningstar Canada, (416) 484-7821;
Christian Charest, Editor, Morningstar Canada, (416) 484-7817 /p
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