Canadian-Focused Funds Lead the Way in May For Equity Investors, Morningstar Data Show

    TORONTO, June 4 /CNW/ - May was another strong month for equity funds,
especially for Canadians investing close to home, according to preliminary
fund performance data released today by Morningstar Canada.
    Resources equities set the pace. The Natural Resource Equity Fund Index -
in which Canadian listings are heavily represented - led all 42 Morningstar
Canada Fund Indices with a 4.5% return for the month, after gaining 3.3% in
    Merger and acquisition activity and a strong Canadian economy buoyed the
domestic stock market generally, as the S&P/TSX Composite Index rose by
640 points - or 5% - during the month. The Canadian Equity Fund Index ranked
second in May with a 4.3% return on the strength of the broader markets, as
eight out of 10 S&P/TSX sectors posted gains.
    Overall, six Canadian-focused categories - including Natural Resources -
owned the top six spots in Morningstar Canada's Fund Indices Rankings. The
Canadian Small/Mid Cap Fund Index gained 3.7% and the Canadian High Income
Equity Fund Index rose 3.2%, to rank third and fourth, respectively. In fifth
place was the Canadian Anchored Small/Mid Cap Fund Index, returning 2.7%,
followed by the Canadian Anchored Equity Fund Index with 2.6%.
    Funds invested mainly in U.S. equities also produced positive returns,
though the gains measured in terms of the Canadian dollar were eroded because
of currency depreciation. The Canadian dollar fetched 93.5 U.S. cents at the
end of May, up 3.4% during the month as it reached its highest level in more
than 30 years.
    The US Small/Mid Cap Equity and US Equity fund indices gained 2% and
0.6%, respectively. "Investors pushed stocks higher in the belief that a
weaker economy sets the stage for a more benign interest rate environment,
which bodes well for stocks," said Morningstar Canada Analyst Philip Lee.
    Overseas, Asian markets also produced positive returns despite the
Chinese market's 6.8% plunge on May 30, in response to the announcement that
China will triple the stamp duty on securities trades from 0.1% to 0.3%. "This
move was the Chinese government's latest attempt at cooling down the country's
overheated equity market," Lee said. For the month, the Asia Pacific Rim
ex-Japan Equity Fund Index gained 2.3% and the Asia Pacific Rim Equity Fund
Index gained 0.6%.
    The European equity markets showed broad advances, in part thanks to
merger and acquisition activity, as the German DAX gained more than 6% while
London's FTSE 100 and Paris's CAC 40 gained roughly 2.7% and 2.4%,
respectively. However, currency depreciation left the European Equity Fund
Index with a 0.8% loss.
    For a second consecutive month, May was a poor month for investors in
fixed-income funds. The worst performance, due to currency losses, was by the
Global Fixed Income Fund Index. It was down 2.8%, ranking at the bottom of the
42 Morningstar Canada indices. Broadly based Canadian-focused bond funds
didn't fare as badly, as the Canadian Core Fixed Income Fund Index dropped
    Despite a 2.3% one-day surge on May 31, the volatile Precious Metals
Equity Fund Index lost money for the month. The index was down 2.2% during a
month in which the price of bullion fell by roughly US$16.
    For more on May fund performance, go to
    Morningstar Canada releases preliminary fund performance figures at the
beginning of each month, giving investors an early indication of how fund
categories fared during the previous month. The preliminary numbers 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 such as dividends,
interest, or capital gains. Final performance figures will be published on next week.

    About Morningstar Canada

    Morningstar Canada is the Canadian subsidiary of Chicago-based
Morningstar, Inc., a leading provider of independent investment research.
Morningstar Canada produces the popular PALTrak and Morningstar Advisor
Workstation investment-fund research tools, and is a major source of Canadian
investment fund information through and
Morningstar Canada is also a leading provider of Web-based solutions for fund
industry Web sites, and provides consulting services based on its data and
related analysis. Morningstar, Inc. provides data on approximately 230,000
investment offerings, including stocks, mutual funds, and similar vehicles.
The company has operations in 16 countries and minority ownership positions in
companies based in three other countries.

For further information:

For further information: Philip Lee, Fund Analyst, Morningstar Canada,
(416) 489-7074, ext. 283,; Christian Charest,
Associate Editor, Morningstar Canada, (416) 489-7074, ext. 226,

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