Stock market volatility in October generally translated into positive results for foreign equity funds and losses for domestically focused funds, according to preliminary performance numbers released Tuesday by Toronto-based Morningstar Research Inc..
Eleven of the 22 Morningstar Canada fund indices that measure the aggregate returns of funds in equity categories were in the black in October.
“The month was plagued by dramatic sell-offs as investors were concerned about numerous issues, including airstrikes in Syria, protests in Hong Kong, the spread of Ebola, worries about the global economy, and fears that the U.S. Federal Reserve would raise interest rates sooner than expected,” said Vishal Mansukhani, Morningstar manager research analyst in a releae. “The month ended with news that the Bank of Japan would increase its stimulus plan, which boosted investor confidence in the global economy and sent stocks around the world soaring.”
The best-performing fund index in October was Greater China equity with a 5.3% increase, reflecting strong gains on both the Shanghai and Hong Kong stock exchanges, as well as modest appreciations by both the Chinese yuan and Hong Kong dollar versus the Canadian dollar. Also among the top performers were the fund indices that measure the Asia Pacific ex-Japan equity and Asia Pacific equity categories, with increases of 3% and 2.3%, respectively.
Funds that invest in U.S. stocks also ended the month among the best performers, with the U.S. small/mid cap equity and U.S. equity fund indices posting increases of 4.2% and 2.7%, respectively. Meanwhile, the fund indices that track the emerging markets equity and global equity categories increased by 1.3% and 1%, respectively, while International Equity and European equity decreased by 0.1% and 1.7%, respectively.
The worst performers in October were the fund indices that measure the energy equity, natural resources equity, and precious metals equity categories, which decreased by 9.5%, 11.4%, and 17.3%, respectively. Those three categories were also at the bottom of the performance table in September with similar losses.
“Energy stocks were hurt by falling oil prices,” Mansukhani said. “As for Precious Metals Equity funds, gold stocks were hurt by falling gold prices. Strong U.S. economic growth and increased stimulus in Japan have boosted the U.S. dollar, which tends to have a negative impact on gold.”
As was the case in September, slumping natural resources also impacted the broader domestic equity fund indices, which all had negative results last month. The Canadian dividend & income equity and Canadian focused equity fund indices both decreased by 0.3%, while Canadian focused small/mid cap equity, Canadian equity, and Canadian small/mid cap equity decreased by 0.4%, 1.4%, and 2.6%, respectively.
Final performance figures will be published next week.