Asian, U.S. Equity Fund Categories Lead in November, Morningstar Canada Data Show

TORONTO, Dec. 3, 2013 /CNW/ - For the third consecutive month, a majority of equity mutual funds in Canada posted positive results in November, with funds that focus on China, Japan, and the United States showing particularly strong numbers. Eighteen of the 22 Morningstar Canada Fund Indices that track equity categories posted increases for the month, including 14 categories that were up by more than 2%, according to preliminary performance numbers today released by Morningstar Research Inc. (Morningstar Canada), a subsidiary of independent investment research provider Morningstar, Inc. (NASDAQ: MORN).

The best performer among all the fund indices was the one that tracks the aggregate returns of funds in the Greater China Equity category, which increased by 6.5% in November.

"Beijing promised the most sweeping economic and social reforms in nearly three decades, including handing more control over the pricing of water, electricity, and natural resources to the markets; liberalising the interest rate and currency regime; and relaxing the one-child policy," Morningstar Fund Analyst Vishal Mansukhani said. "The reforms are said to help China shift to an economy that is more reliant on services and domestic consumption, rather than infrastructure expansion."

The Morningstar Japanese Equity Fund Index was also among the top performers in November with an increase of 4.3%, its best monthly performance since April.

"Many of Japan's powerhouse exporters benefited from the yen's weakness, since buyers with dollars will find it cheaper to purchase electronics made by export manufacturers like Sony," Mansukhani said.

Funds that invest in U.S. equities did very well last month. The Morningstar U.S. Small/Mid Cap Equity and U.S. Equity fund indices increased by 4.5% and 4.1%, respectively, as economic signals suggested that consumers may be poised to provide a boost to economic growth. Additionally, investors were relieved by a temporary end to fiscal battles in Washington, D.C. and appeared to be moderately encouraged by third-quarter corporate earnings reports.

While stock markets in China and the United States enjoyed strong gains, Canadian fund investors in these categories also benefited from favourable currency effects, as the Canadian dollar declined by 1.6% last month against the U.S. dollar, the Hong Kong dollar, and the Chinese yuan. The loonie also dropped against the euro by 1.7% and against the UK pound by 3.4%, which helped the Morningstar European Equity Fund Index post a 2.7% increase for the month despite lacklustre market returns in France and the UK.

Domestic equity funds had positive but middling results last month. However, fund managers were able to add value over their market benchmarks: the Canadian Equity, Canadian Dividend & Income Equity, and Canadian Focused Equity indexes increased by 0.9%, 1.1%, and 1.9%, respectively, beating the S&P/TSX Composite Index's rise of 0.5%. Meanwhile, the Canadian Focused Small/Mid Cap Equity and Canadian Small/Mid Cap Equity indexes were up 2.4% and 3%, respectively, both surpassing the BMO Small Cap Blended Index's 1.9% increase.

Once again, the worst-performing equity fund index in November was Precious Metals Equity with a decrease of 10.9%.

"Gold declined because of speculation that a strengthening U.S. economy will warrant less stimulus, which would negatively impact the demand for gold. After 12 calendar years of gains, gold is set for its first annual drop in 2013 as some investors may have lost faith in the metal as a store of value," Mansukhani said.

The other three equity fund indices in negative territory were Emerging Markets Equity with a 0.6% decrease, Real Estate Equity, down 1.8%, and Natural Resources Equity, down 2.4%.

"China's infrastructure expansion led the country to become one of the world's largest consumers of natural resources and raw materials. However, a move away from infrastructure expansion to a more consumer-driven economy may mean less demand for natural resources," Mansukhani said.

For more on November 2013 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 Research Inc. and Morningstar, Inc.
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 individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. Morningstar provides data on approximately 437,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 10 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 approximately US$176 billion in assets under advisement or management as of Sept. 30, 2013. The company has operations in 27 countries.

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SOURCE: Morningstar Research Inc.