TORONTO, Sept. 5, 2012 /CNW/ - The Canadian economy's three largest sectors -- financials, energy and materials -- all posted solid returns in August, leading to gains for the investment funds that target those sectors as well as for broader domestic equity funds. European and U.S. equity funds also did well for the month, but those that focus on Asian equity markets had negative results, according to preliminary performance numbers released today by Morningstar Canada.
By far the best performer among the 42 Morningstar Canada Fund Indices was the one that follows the Precious Metals Equity category, which saw a 10.1% increase in August. "Gold and silver turned sharply upward in the last third of the month, nearly hitting US$1,700 and US$31 per ounce, respectively. Speculation on additional quantitative easing in the United States led to demand for the metals, as the prospect of a weakening dollar meant expectations of rising prices," said Morningstar Fund Analyst Adam Fisch.
In second place, the Morningstar Natural Resources Equity Fund Index, which was also the second-best performer in July, had another good month in August with a 3.1% increase, while the fund index that tracks the Financial Services Equity category finished the month in fifth place with a 2.2% increase.
The success of these three industry sectors also meant good news for funds in the diversified domestic equity categories; the Morningstar Canadian Equity Fund Index, whose constituent funds allocate on average nearly three-quarters of their portfolios to these sectors, increased by 2.4%. Meanwhile, the Canadian Small/Mid Cap Equity, Canadian Focused Small/Mid Cap Equity, and Canadian Dividend & Income Equity fund indices saw increases of 2.1%, 1.8%, and 1%, respectively.
South of the border, the S&P 500 Index approached its highest level in four years, ending the month with a 2.3% gain when expressed in U.S. dollars. For Canadian investors, this translated into a 1.5% increase for the Morningstar U.S. Equity Fund Index after accounting for unfavourable currency effects. Funds in the U.S. Small/Mid Cap Equity category did even better with an average increase of 2.4% for the month.
Stock markets in Europe also had a very good month, with France's CAC40 Index leading the way with a 3.7% gain and Germany's DAX Index following closely with 2.9%. "The European Central Bank's sovereign bond buying plan has injected some faith into the Eurozone, which stabilized markets as the end of the month approached," Fisch said. The Morningstar European Equity Fund Index increased by 2% for the month.
The weakest categories in August were Greater China Equity and Japanese Equity, which decreased by 4.2% and 3.3%, respectively. "Chinese manufacturing unexpectedly shrunk during the month, and the strengthening of the yen created a challenging environment for Japanese manufacturers," Fisch said. The difficulties in these two countries also affected the broader Asia Pacific Equity, Asia Pacific ex-Japan Equity, and Emerging Markets Equity categories, which all finished near the bottom with decreases of 1.1%, 1.9%, and 1.6%, respectively.
For more on August 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.
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 products and services for individuals, financial advisors, and institutions. Morningstar provides data on more than 385,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 8 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its registered investment advisor subsidiaries and has more than US$186 billion in assets under advisement or management as of June 30, 2012. The company has operations in 27 countries.
SOURCE: Morningstar Research Inc.
For further information:
Adam Fisch, Fund Analyst, Morningstar Canada, (416) 484-7815; Christian Charest, Editor, Morningstar Canada, (416) 484-7817