China, U.S. equity fund indices up 5.1% in February: Morningstar

Forty-one of Morningstar Canada’s 44 fund indices increased during the month of February, reveals a preliminary report by Morningstar Research. In fact, 20 indices increased by more than 2%. The indices measure the aggregate returns of funds in various standard categories.

Most stock market indices outside Canada were positive in February, while the Canadian dollar depreciated against many of the world’s currencies. This combination resulted in strong performance for all foreign equity fund categories in Canada.

The month’s top performers were funds in the Greater China equity and U.S. equity categories. The Morningstar Canada fund indices that track these two categories both increased by 5.1%. The S&P 500 Index had a total return of 4.0%, and the U.S. dollar gained 1.7% on its Canadian counterpart. Stock markets in Shanghai, Hong Kong and Taiwan were up 2.6%, 1.6% and 3.2%, respectively, with currency effects also providing a boost in all three cases.

Read: Will U.S. equity valuations keep climbing?

Among the major sector-diversified foreign equity categories, the fund index that tracks emerging markets equity funds was a top performer with a 4.6% increase, as was the Asia Pacific equity fund index with a 3.7% increase. The European equity, international equity and global equity fund indices increased by 2.8%, 2.9% and 4.0%, respectively.

Read: How to use themes to understand emerging markets

Losers and slow gainers

Fund indices that track the precious metals equity, energy equity and natural resources equity categories were losers — down 2.1%, 2.3% and 2.4%, respectively.

Energy and materials, which together comprise a third of the Canadian stock market, were the worst performers on the TSX, with declines of 2.4% and 3.7%, respectively.

The poor showing by natural resources stocks dragged down the performance of diversified Canadian equity funds, resulting in increases of just 0.3% for the Morningstar Canadian Equity Fund Index and 0.1% for the Morningstar Canadian Small/Mid Cap Equity Fund Index. The fund indices that track the Canadian focused equity and Canadian focused small- and midcap equity categories, whose constituent funds can hold up to half their assets in non-Canadian stocks, performed better, with increases of 1.6% and 1.9%, respectively.

Fixed income

All fixed income fund categories showed gains for the month, with increases ranging from 0.3% for the Morningstar Canadian Short-Term Fixed Income Fund Index to 1.7% for the Morningstar Canadian Long-Term Fixed Income Fund Index.

Read the preliminary report.

Morningstar will publish final performance figures next week.

Also read: Should you charge fee or MERs to save clients tax?