Shortly before the “Tagesschau” starts, Germany’s best-known table flickers reliably over millions of television screens. The camera zooms over the stock traders’ heads to a line on the board that sometimes points up, sometimes down, sometimes twitches as if it doesn’t know the direction itself. For many people, the view of the Dax has become a ritual between dinner and the couch. Millions of viewers are likely to consider the leading index to be a reflection of the German economy. You are wrong.
Figures from the consulting firm EY show that foreign investors have long been calling the shots. While only 31.3 percent of the Dax shares can be assigned to German investors, more than 52 percent are in the hands of foreign investors. “Made in Germany is very attractive for foreign investors,” says investment strategist Chris-Oliver Schickentanz from Capitell Vermögens-Management.
This realization is bitter for German savers, after all the 40 Dax companies are paying out 52 billion euros in dividends this year. “Investors abroad are now primarily benefiting from the record dividends,” says study author Henrik Ahlers from the consulting firm EY. According to the consultants’ calculations, only 20 billion euros of the total dividend actually flow into German accounts.
Foreign investors are particularly strong in the housing giant Vonovia, Deutsche Börse itself and the chemicals trader Brenntag, where more than 80 percent of all shares are owned by foreigners. These include, for example, large investors such as the Norwegian sovereign wealth fund, the investment company Blackrock and a large number of foreign fund companies.
So are Adidas, BMW or Zalando really no longer German companies? If you look purely at the origin of the investors, you might think so. In just eight of the 40 Dax companies, the EY experts can prove without a doubt that German investors still hold the majority of the shares. Among them are former people’s shares such as Deutsche Telekom, the chemical company BASF or the consumer goods giant Beiersdorf.
Conversely, foreign investors have long dominated in the vast majority of DAX companies: Investors from abroad at least have a say in climate targets, executive remuneration and some personnel changes. The USA, for example, has long since ceased to be just an important sales market for German companies. “In addition, some very important institutional investors have their headquarters here, who actively influence the business orientation of German companies,” says EY man Henrik Ahlers.
Foreign investment companies could therefore also incorporate moral concepts from third countries or foreign sanctions into their decisions. At a time when European economic policy is trying to find a new line between the economic superpowers of the USA and China, figures like these make you sit up and take notice.
However, the whole picture also includes the fact that German corporations would be in a worse position without their international character. The 40 Dax companies only make 20 percent of their sales in their own country. Asia also accounts for around 20 percent, the USA roughly 30 percent, and the rest of the sales are generated by the groups in the rest of Europe. In addition, without foreign investors, German stocks would be traded less frequently on the stock exchange, which would mean that the quality and resilience of the prices would be worse.
“Only relying on it is rather unhealthy”
Investors can draw the conclusion from these findings: Instead of investing more in Germany, many investment experts believe that they should invest less in their home country. “The German stock market does not even make up three percent of the weight of the entire world stock exchanges,” says investment strategist Philipp Dobbert from Quirin-Privatbank. However, according to data from the Bundesbank, domestic shares still make up more than half of the shares in German portfolios.
However, savers with German shares are more dependent on the course of the global economy than in other countries, making themselves heavily dependent on a few car and chemical companies and other industrial companies. “Only relying on it is rather unhealthy,” says investment strategist Chris-Oliver Schickentanz from Capitell Vermögens-Management. In the end, investors could depend not only on the course of the German economy with their investment money, but also with their job.