TORONTO, Feb. 3 /CNW/ - Investment funds that target non-Canadian
equities had an inauspicious start to the year, as the Morningstar Canada Fund
Indices that track these funds posted heavy losses in January. Domestic equity
funds were also in the red last month, but their losses were not as severe,
according to preliminary performance data released today by Morningstar
The Morningstar International Equity Fund Index had the worst return
among all fund indices in January with a 10.3% loss, followed by European
Equity, down 9.7%. These numbers reflect market losses on almost every
exchange in Europe and Asia, as well as a 7.1% depreciation of the euro versus
the Canadian dollar. Meanwhile, the fund indices that track the Asia Pacific
ex-Japan Equity, Asia Pacific Equity, Greater China Equity and Japanese Equity
lost 7.8%, 8.2%, 8.3% and 9.2%, respectively.
"Disappointing earnings results and pessimistic guidance from reporting
companies weighed on equities in January," said Esko Mickels, fund analyst
with Morningstar Canada. "Dismal employment numbers and a daily stream of
layoff announcements stoked fears of a deepening global recession."
Markets also had it tough in the United States, where the S&P 500 Index
lost 8.4% for the month. "Even a new president failed to inspire hope as U.S.
indices resumed their decline in January," Mickels said. "The day of Barack
Obama's inauguration alone, the S&P 500 fell almost 5.3%."
However, unlike funds that invest in Europe, currency movements had a
positive impact on funds in the U.S. Equity category, which collectively lost
7.8% for the month. The Canadian dollar shed almost 1% against the greenback
as investors sought the relative safety of U.S. dollars.
In Canada, the S&P/TSX Composite Index had a good run in the first few
days of the month but finished with a 3% loss, dragged down by bleak economic
news and worries over worsening conditions in both Canada and the United
States. The Morningstar Canadian Equity Fund Index lost 3.6%, while the
Morningstar Canadian Focused Equity Fund Index was down 4.8%. Bucking a recent
trend, small-cap funds outperformed their large-cap counterparts last month;
the Morningstar Canadian Small/Mid Cap Equity Fund Index lost just 0.3%, while
Canadian Focused Small/Mid Cap Equity was down 1.2%.
Only five of the 43 Morningstar Canada Fund Indices had positive returns
in January. Topping the list were the indices that track the Precious Metals
Equity and Natural Resources Equity fund categories, with gains of 8.4% and
5.8%, respectively. "Global economic woes chopped demand for resources,
keeping prices at depressed levels. Nevertheless, these sector funds posted
gains as investors nibbled at companies trading at significant discounts to
their mid-summer prices, while some companies are beginning to benefit from
takeover speculation," Mickels said.
For more on January 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 the 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 290,000 investment offerings, including
stocks, mutual funds, and similar vehicles. The company has operations in 19
countries and minority ownership positions in companies based in three other
For further information:
For further information: Esko Mickels, Fund Analyst, Morningstar Canada,
(416) 484-7815; Christian Charest, Associate Editor, Morningstar Canada, (416)