Record-high oil prices powered natural resource funds to a market-leading performance in September, as the Morningstar Canada Natural Resource Fund Index soared 8.9%.

According to preliminary data from Morningstar Canada released today, 19 of the 32 Morningstar Canada fund indices gained ground during September. This was an improvement from August, when half of the indices were in the black. Natural Resources also was the best performer during the third quarter, gaining 9.7%, and had the best year-to-date return, 12.9%, at Sept. 30.

“The price of oil was bid up as U.S. oil production was hampered by Hurricane Ivan and social unrest continued in key producing nations such as Saudi Arabia, Iraq and Nigeria,” said David O’Leary, Morningstar Canada senior analyst, in release.

September’s second-best one-month performer was the Morningstar Canada Precious Metals Fund Index, which surged 7.6%. That came on the heels of a no. 1 performance in August of 5.8%. “The rise in the price of oil prompted worries that rising prices could exert inflationary pressures on the economy,” O’Leary said. “Since gold is often sought as a hedge against inflation, gold was a benefactor of these fears.”

The month’s worst performing fund index was Japanese Equity, which lost 6.2%, followed by Asia/Pacific Rim Equity, off 2.7%. Asia ex-Japan funds broke even with a 0.2% return. “Oil price concerns and the economic outlook weighed on Japanese stock prices,” O’Leary said. “Tokyo’s Nikkei fell by almost 3% in September led by Japan’s four big banks and leading retailer Aeon.”

For the third quarter, after Natural Resources the top performers were Latin American Equity, up 8.3%, and Precious Metals, up 7.9%. Year to date, the second best performers were Latin American Equity and Canadian Income Trusts, each up 11.3%.

Canadian equity funds had a healthy month, as the Canadian Equity (Pure) index gained 3.4%. The index was up 3.4% during the third quarter and 6.5% for the year to date. The Canadian Equity index gained 2.4% in September and 1% and 4.7% for the quarter and year to date.

September was cruel to U.S. Equity funds, as their fund index was the month’s third-worst performer, falling 1.9%. The index lost 7.1% during the third quarter and was down 2.4% year to date.

http://www.newswire.ca/en/releases/archive/October2004/04/c6450.html