Mutual funds focused on healthcare stocks surged 7.7% during January, according to a survey of preliminary performance data by Morningstar Canada.

Asia ex-Japan Equity and Science & Technology funds also fared well (up 7.5% and 7% respectively) as Canadian mutual funds continued 2003’s strong performance with gains across nearly all of the 32 Morningstar Canada Fund Indices.

Morningstar now makes preliminary fund performance figures available at the beginning of the month, giving investors an early indication of how fund categories fared during the month just ended. The preliminary numbers are based on the change in funds’ net asset values per share during the month, and do not include distributions such as dividends, interest or capital gains. Morningstar will release final performance figures — including distributions — at mid-month.

Preliminary data shows that only two Morningstar Fund Indices were in negative territory in January: Precious Metals and Natural Resources (down 8.5% and 1.3% respectively).

Among the largest fund indices in terms of total assets, the preliminary figures for January showed that Canadian Equity rose 2.3%, Canadian Dividend 1.6%. Canadian Balanced 1.9%, Global Equity 4.8% and International Equity 4.5%.

“Healthcare funds were propelled by the biotechnology stocks,” said David O’Leary, senior analyst with Morningstar Canada. “Several leading biotech companies began the year by reporting favourable fourth-quarter earnings. The biotech sector also benefited from a positive outlook, with analysts and biotech firms projecting strong revenue growth in 2004 driven by increased sales of existing drugs and promising drug candidates currently in the pipeline.”

O’Leary said encouraging economic news out of China and of strong earnings reports from semiconductor manufacturers contributed to the Asia ex-Japan Fund Index’s strong showing.

Precious Metals funds suffered a second straight month of negative returns after posting the best performance among all fund indices in 2003. A combination of profit taking and a falling gold price contributed to January’s drop, O’Leary said.