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Attention Business Editors
Strong rally continues for funds in June, Morningstar Data Show
TORONTO, July 3 /CNW/ - Mixed but mostly positive performance by the
world equity markets, combined with a weakening Canadian dollar, produced a
fourth consecutive month of solid returns for most equity fund categories in
June. Forty of the 43 Morningstar Canada Fund Indices posted gains for the
month, with foreign equity categories dominating the top of the rankings,
according to preliminary performance data released today by Morningstar
Canada.
However, the top-performing fund index for the month was one that tracks
a sector-specific fund category; the Morningstar Health Care Equity Fund Index
posted a 10% gain - its first double-digit monthly return in nearly nine
years. "Health care equities appreciated in the latter half of the month,
coinciding with U.S. Senate discussions on health care reform," said Nick
Dedes, fund analyst for Morningstar Canada. "Within the sector, we saw
pharmaceuticals advance meaningfully, likely at the prospect of millions of
currently uninsured individuals eventually gaining access to prescription
drugs under the proposed reform plan."
All 12 fund indices that track foreign equity categories posted
above-average gains in June, with returns ranging from 8.7% for the
Morningstar Japanese Equity Fund Index (which ranked second overall) to 3.7%
for European Equity (in 16th place). Foreign equity funds - particularly those
that focus on Asia - benefitted from strong market returns in China and Japan,
but it was the loonie's steep depreciation against virtually all major
currencies that contributed the bulk of their returns.
This created an ideal combination for funds in the Japanese Equity
category, as the yen's 5.1% appreciation compounded the Nikkei 225 Index's
4.6% gain. The situation was similar in China, where the Shanghai Composite
Index's 12.4% gain was coupled with the renminbi's 6% increase against the
Canadian dollar. The Morningstar Greater China Equity Fund Index gained 8.4%
in June, ranking fourth among all fund indices.
In the United States, the S&P500 Index was mostly flat when measured in
U.S. dollars, gaining just 0.2%. But the U.S. dollar's 6% increase against its
Canadian counterpart resulted in gains of 5% and 6.6% for the U.S. Equity and
U.S. Small/Mid Cap Equity fund indices, respectively. Meanwhile in Europe,
major benchmarks in France, Germany and the United Kingdom posted losses of
4.2% (CAC 40), 2.7% (DAX), and 3.8% (FTSE 100), respectively, but these were
offset by gains of 5.2% for the euro and 8% for the UK pound against the
loonie, resulting in positive returns for European Equity funds.
"A reversal in commodity prices alongside cautionary comments from the
Bank of Canada weighed on the loonie in June. The governor of the central bank
suggested that the country will continue to need policies that will stimulate
the economy, as rising unemployment is increasing financial stress among
households," Dedes said.
Domestic equity funds did not have the benefit of currency effects, but
most indices had positive results, led by the Morningstar Canadian Dividend &
Income Equity Fund Index (up 2.7%). The more broad-based Canadian Equity
category returned 0.1% reflecting the minimal gain of the S&P/TSX Composite
Index (0.3%) for the month.
The worst-performing fund index in June was Precious Metals Equity, which
lost 6%. "The greenback strengthened during the month, which weighed on U.S.
dollar-denominated precious metals such as gold, platinum, and silver and
lessened their attractiveness as a store of value," Dedes said. The other two
fund indices in the red were Natural Resources Equity and Canadian Small/Mid
Cap Equity, with losses of 2.4% and 0.3%, respectively.
For more on June fund performance, go to www.morningstar.ca.
Morningstar Canada's preliminary fund performance figures are based on
the 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. 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 more than 300,000 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 19 countries and minority ownership positions in
companies based in three other countries.
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/For further information: Nick Dedes, Fund Analyst, Morningstar Canada,
(416) 484-7823; Christian Charest, Associate Editor, Morningstar Canada, (416)
484-7817/
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