The strength of Asian stocks helped boost the performance of foreign equity funds in January, according to preliminary data published Friday from Toronto-based Morningstar Research Inc.
Twenty-four of 44 fund indices rose during the month, with nine of them climbing by 2% or more, while 18 of the 20 losing indices fell by 1.6% or less.
The best performer was Greater China equity, which followed up its chart-topping 35.9% increase in 2017 with an 8.7% increase in January.
While currency effects detracted from returns during the month, stock markets in Hong Kong, Shanghai, and Taiwan posted solid gains of 9.9%, 5.3%, and 4.3%, respectively.
Asia Pacific ex-Japan equity and Asia Pacific equity, which were among the top performers in 2017, also continued their winning streak in January, increasing 3.5% and 3.3%, respectively.
While China was the main driver of returns, other markets including South Korea and Japan also contributed positively. The strength of Asian stocks also helped funds in the emerging markets equity category, which collectively increased 5%.
In the United States, the S&P 500 index posted a total return of 5.7%, but the U.S. dollar depreciated by 2% against its Canadian counterpart, resulting in an increase of 3.6% for the U.S. equity fund index.
Among other foreign equity categories, global equity increased 2.7%, while international equity and European equity were up 2.2% and 2.1%, respectively.
Domestic equity funds were among the worst-performing equity categories for the month, as the energy sector continued to impede the Canadian market. Canadian equity had the worst result among all diversified equity categories with a 1.4% drop, matching the total return of the S&P/TSX composite index. Canadian dividend and income equity and Canadian small/mid cap equity were also in the red with declines of 1.3% and 1.1%, respectively, while Canadian focused small/mid cap equity and Canadian focused equity — whose constituent funds can hold up to half their assets in non-Canadian stocks — had positive results with 1.8% and 0.3%, respectively.
The worst-performing fund indices were the ones that track the precious metals equity and the energy equity, decreasing 2.6% and 2.7%, respectively. Three other sector-specific indices in negative territory for the month were global infrastructure equity, natural resources equity, and real estate equity, down 1.6%, 0.7%, and 0.7%, respectively. The only sector-fund category to post an increase was financials services equity, up 2.5%.
Morningstar’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 next week.