A declining Canadian dollar helped to boost 38 of Morningstar Canada’s 44 fund indices during April, according to preliminary figures published Tuesday by Toronto-based Morningstar Research Inc.
The loonie depreciated against all major world currencies due in part to falling oil prices and speculation over the future of trade agreements with the United States, Morningstar notes.
These currency movements provided a boost to funds that focus on foreign equities and do not hedge their currency exposure, with 18 fund indices increasing by more than 2%, Morningstar says.
The steepest decline for the Canadian dollar was against the euro and the U.K. pound, depreciating 4.5% and 5.8%, respectively. Combined with modest gains on European stock markets, this led to strong performance for funds in the European equity category; the European equity fund index was the top-performing fund index in April with an increase of 6.0%.
Favourable currency effects and market gains also combined to produce good results for Asian equity funds. The Asia Pacific ex-Japan equity fund index was the second-best performer overall with a 5.1% increase, while emerging markets equity was up 4.7%, and Greater China equity and Asia Pacific equity were both up 4.4%. Stock indices in Hong Kong and Seoul were both up by 2.1%, and Japan’s Nikkei 225 index was up by 1.5% for the month, while the Hong Kong dollar, the Chinese renminbi and the Japanese yen all appreciated by approximately 2.6% against the Canadian dollar.
In the United States, the S&P 500 index had a total return of 1.0% while the U.S. dollar appreciated by 2.6% against the loonie. As a result, funds in the U.S. Equity category produced an aggregate gain of 3.0%. The U.S. small/mid cap equity Fund Index increased 2.5% for the month.
In Canada, the S&P/TSX composite index produced a total return of 0.4% despite losses in the country’s three largest stock sectors: The energy, financials, and materials sub-indices lost 1.8%, 1.4%, and 0.3%, respectively. Funds in the Canadian equity category remained positive in aggregate but were near the bottom of the April performance ranking with a 0.7% increase. The Canadian focused equity fund index performed slightly better with a 1.4% increase, while funds in the Canadian small/mid cap Eeuity category, which typically contain a larger stake in natural resources stocks than their large-cap counterparts, decreased by 0.6%.
The worst performers in April were fund indices that track sector-specific categories. energy equity, natural resources equity, and precious metals equity decreased 2.9%, 2.3%, and 1.9%, respectively, while financial services equity was down 1.4%.
Morningstar 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 next week.
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