Science and technology funds, underperformers for much of 2005, rebounded in May, accordin to premlimary figures compiled by Morningstar Canada.

The Morningstar Canada science and technology fund index rose 6.7% during the month, but the index still was in negative territory on a year-to-date basis at May 31, down 0.2%.

Overall, 28 of the 32 Morningstar Canada fund indices produced positive returns, compared with 20 gainers in April.

Morningstar says sci-tech funds were propelled by positive earnings news at Dell Inc., which saw profits increase by 28% in the first quarter over the same period last year. “Earnings of US$0.37 per share were in line with analysts’ expectations, but Dell also gave strong guidance for the remainder of the year,’ said Morningstar Canada analyst Mark Chow, in a release. Dell’s shares rose over 14% for the month.

Latin American equity funds also had a solid month of May. The Latin American equity fund index gained 6.5%, increasing its year-to-date return to 9.7% – the best among all the fund indices.

Despite the good performance, Morningstar say the Latin American equity category will disappear next week when the fund research firm releases final data for periods ended May 31, 2005. The category’s five remaining funds will be rolled into the larger emerging markets equity category. That index also had a strong May, with a one-month return of 3.4%.

In addition to the merging of the Latin American equity into the emerging markets equity category, a new category, Canadian income balanced, will be created, populated mostly by income-oriented funds from the Canadian balanced and Canadian asset allocation categories.

U.S. small and mid cap equity was the third best performing fund index, with a one-month return of 5.2%.

Last month’s top fund index, healthcare, put in another strong month, rising 2.4%, after a 5.5% gain in April.

Morningstar says April’s bottom feeders recovered in May: natural resources gained 1.9% after losing 6% in April, while precious metals’ 0.4% was a substantial improvement over its 7.5% plunge a month earlier.

May’s worst performing fund index was Japanese equity, down 2.8%.

Among the more mainstream categories, Morningstar says funds focused on North American stocks generally outperformed in May. The U.S. equity index gained 3.1%, while Canadian equity (pure) rose 2.7% and Canadian equity was up 2%. The Canadian small cap equity and Canadian income trust fund indices gained 2.2% and 1.9% respectively. The Canadian balanced and Canadian bond fund indices each rose 1.6%, while Global equity gained 1.5%.

“Unlike last month where markets all over the planet were seeing losses, May was the proverbial rebound,” Chow said. “The fears of rising inflation and an economic slowdown in the United States as well as a slowing Chinese economy were somewhat assuaged. Economic statistics out of Washington also gave investors confidence to bid up stocks in the U.S. marketplace.”