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By Christian Charest and Joanne Xiao | 11-02-2012

October fund performance update

Equity funds in Canada reveal mixed results, positive returns for Asian and European markets while U.S. and Japanese equity funds were in the red.

Christian Charest: Equity funds in Canada had mixed results for the month of October. Some categories such as Chinese equities and European equities did very well, while others, namely U.S. equities and Japanese equities – and some of the smaller sector funds had negative results for the month – and Canada ranked somewhere in the middle.

I'm here with Joanne Xiao, fund analyst here at Morningstar to talk about these results. Now, Joanne, let’s start with China, the Morningstar Greater China Equity Fund Index returned 5.4% for the month and that's the second month in a row that it's had a return north of 5%. What's driving the returns for these funds?

Joanne Xiao: Yeah, Christian, you know the Chinese Government has implemented some small steps to help boost its slowing economy, including injecting cash into the money market and it also increased its planned investment in the high speed rail for the third time this year. And also, the Chinese leadership is going to have its once every 10 years change over on November 8. So, investors have been expecting more stimulus measures coming out of the new government.

Charest: So, that's creating some enthusiasm on the Chinese markets. Now, government stimulus has also been the story for the second best performer among the Morningstar Fund Indices, and that's European equity, which the index returned 2.6% for the month.

Xiao: Yeah, in fact European equity has had a broad run for three months in a row now on the back of the ECB’s bond-buying program and that's been really good for investors.

Charest: Indeed. When we talk about government stimulus, of course, we have to talk about the third round of quantitative easing in the United States, which was announced in September. It's had a good impact, but it surprisingly seems to be running out of steam in some areas, notably commodities.

Xiao: Yeah, commodities have had two months of rally since August. Well, precious metal and natural resources in particular and in October, it seems like it just ran out of steam. The Bank of Canada had a specific target for GDP that QE3 is going to bring over to the Canadian economy and now consensus has shown that maybe that target is little too optimistic.

Charest: We've seen the Canadian equity funds still have some positive returns for the month of October, but the other two categories that you mentioned, precious metals and natural resources, both had negative returns for the month.

For a complete table of the Morningstar Canada Fund Indices for the month of October, you can click on the link that's right below the video player and check back with us regularly for more news and updates.