Status: 04.09.2021 01:08 a.m.
33 years after it was founded, the DAX is getting a new face. The first German stock exchange league becomes more modern and grows from 30 to 40 members. In the evening it was announced who the new ones are. What else is changing?
The German share index DAX has been the barometer of the German economy since 1988. Its price development shows how well or how badly domestic companies are doing – as far as they are listed on the stock exchange. But is the leading index composed in a representative way? Many experts and investors say no. The DAX does not adequately reflect the German economy, they have been criticizing for years. For a long time the index was dominated by the “old economy”, the ailing cyclical sectors such as the chemical and automotive industries, the energy industry and the financial services sector.
Broader picture of the German economy
That should change now. Deutsche Börse is broadening the German benchmark index – and increasing it from 30 to 40 members. “With 40 values we can map the economy more broadly,” says Stephan Flügel from the Deutsche Börse subsidiary Qontigo, who is responsible for the index reform.
In the future, high-growth, modern industries such as health and medical technology as well as online retail will play a larger role in the DAX. The exact composition and thus also the names of the newcomers was announced by Deutsche Börse late in the evening after the US stock market closed: With Siemens Healthineers, Sartorius and Qiagen, three companies from the health sector will be promoted to the German stock exchange league.
Ten new members: from Airbus to Puma
The biggest new heavyweight in the DAX40 will be Airbus. The aircraft and armaments company will have around five percent weight in the leading index. This would make Airbus the fifth largest DAX stock.
The other new members in the increased DAX are the flavors and fragrances manufacturer Symrise, the online fashion retailer Zalando, the chemicals dealer Brenntag, the holding company Porsche, the sporting goods manufacturer Puma and the cooker box mail order company HelloFresh. They all come from the MDAX, the second German stock market league. In contrast, the “Nivea” manufacturer Beiersdorf missed the return to the DAX.
The DAX reform is unlikely to change much for private investors. The DAX ETFs will be rebuilt according to the new composition. You will buy the shares of the DAX newcomers according to their weight and sell shares in the previous DAX values. The previous DAX30 members are losing some of their weight. In the future, auto stocks in particular will no longer dominate the index as they did before.
“Dax becomes a growth index!”
Stock exchange experts praise the innovations. “The DAX40 will be better mixed and lively,” says equity strategist Christian Kahler from DZ Bank. Sectors that are important to investors, such as health and medical technology, are gaining in importance. “The DAX is taking a small step from dividend to growth index,” says index expert Silke Schlünsen from Stifel Europe Bank.
Christine Bortenlänger, head of the Deutsches Aktieninstitut, was also pleased. “The DAX will be even more attractive because the new players are younger and bring other ideas to the field,” she said, referring to the language of football.
The leading index remains heavy on the industry
Joachim Scvhallmeyer, investment strategist at DekaBank, is more skeptical. Despite the expansion, the German benchmark index will not change completely, he says in the ARD stock exchange studio. The DAX will continue to be an industry-heavy index, with Airbus it will become even more cyclical.
This is intended to give the German stock market barometer more attention internationally. With the Cac40 and the FTSE, other countries such as France and Great Britain have more representative and larger indices than the DAX 30. Experts doubt that the new DAX could catch up with the competition. “US stock indices are much more attractive because they have a very high share in sustainable industries such as technology and communications,” says Manfred Schlumberger, portfolio manager at Asset Management StarCapital.
Stricter rules
In addition to the expansion, Deutsche Börse is also tightening the rules for the companies it contains – as a consequence of the Wirecard scandal a year ago. The future DAX members must be profitable for two financial years in a row. The rule does not apply to the current DAX members. This means that Delivery Hero can remain in the German leading index in the future. The online food delivery service has not made any money since it was founded in 2011.
In addition, the financial reporting obligations are becoming stricter. The DAX members must publish quarterly reports and certified annual financial statements. If they do not do this after a 30-day warning period, they are threatened with expulsion. In addition, the composition of the DAX will in future be reviewed not just once, but twice a year.
Only market capitalization as the decisive criterion
The central criterion is the market value, i.e. the market capitalization. The previous second criterion for inclusion in the DAX, the stock exchange turnover, is no longer applicable. In future there will only be one minimum liquidity requirement.
Shareholder advocate Klaus Nieding from the German Association for Protection of Securities Holdings (DSW) praises the new, tightened rules as a “big step in the right direction”. “It gives us more stability and more confidence in the index,” he said ARD stock exchange studio.
BioNTech is not there
A stock market star will also be missing in the new larger DAX: the vaccine manufacturer BioNTech. The Mainz company’s shares are not listed on the Frankfurt stock exchange, but in New York. BioNTech has reached a market capitalization of 70 billion Euiro there – half of what the most valuable DAX company, SAP, is worth.
The MDAX is suffering from the major DAX reform. The second German stock exchange league is reduced from 60 to 50 members and loses its biggest draft horses. With the reallocation, he will lose almost half of his market capitalization. Despite the downsizing, experts such as Ulrich Stephan, chief investment strategist at Deutsche Bank, continue to consider the MDAX to be interesting.