Successor to Linde: who should be promoted to the DAX

It was a bang when Linde – after all, the most valuable company on the German stock market – announced its withdrawal from the DAX. Today it will be announced who will be the successor – and there is a clear favorite.

At the Commerzbank in Frankfurt, champagne corks could still pop today. Because the Deutsche Börse announces in the evening who will be promoted to the German stock index at the end of February for the voluntarily withdrawing Linde AG. Chris-Oliver Schickentanz from Capitell Vermögens Management would be very surprised if it wasn’t Commerzbank: “When Linde decided to leave the DAX, there were actually two candidates. Namely, alongside Commerzbank there was also Rheinmetall. But Commerzbank has now Facts created: She preferred the publication of her business figures.”

And with this trick, she proved just in time that she was not only profitable in 2021, but also in 2022 – and thus two years in a row. Deutsche Börse also demands this from DAX candidates. It’s now official: With a good 1.4 billion euros, the bank will make its highest profit in 2022 since 2007, i.e. before the financial crisis.

Saved in the financial crisis

The bank struggled during the crisis and had to be rescued by the state. Four and a half years ago, the former founding member became too weak for the DAX and had to leave. It was pushed out at the time, of all things by the payment processor Wirecard, which has since been removed from the DAX on suspicion of accounting fraud and market manipulation.

If Commerzbank now returns to the first stock exchange league instead of the armaments group Rheinmetall, it will move back into the limelight. Because the DAX is the barometer of the German economy – and receives a lot of attention from national and international investors. Joachim Schallmayer, capital market strategist at Deka-Bank, emphasizes: “It’s a positive signal when you’re allowed to move up to the leading index. It’s an image boost for every company if you’re included in the leading index.”

“A heavy blow for the DAX”

But what may be good for Commerzbank if it makes the leap is not easy for the Frankfurt financial center. Because the change only comes because the industrial gases manufacturer Linde only wants to be listed in New York and no longer in Frankfurt. This is also how expert Schallmayer sees it: “With Linde, not only is a traditional company with roots in Germany going. Linde has also belonged to the DAX without interruption since it was founded in 1988. And it is currently the most important index member. That is why it is a difficult one Blow for the DAX.”

And this blow also has consequences for exchange-traded index funds. They want to map one-to-one how market indices – including the DAX – are developing, says Uwe Streich, equity strategist at LBBW: “If Linde is no longer in the DAX, it means that the Linde funds will have to sell them buy Commerzbank in return.” But that’s not enough, because Commerzbank has a much lower weight in the DAX because of its lower market value.

Funds have to buy more

The solution: The remaining 39 DAX companies are given more weight in the DAX – and accordingly also in the index funds. As a result, the funds have to buy more, says Streich: “This ultimately means that the fund providers have to buy all the other index members in order to be able to map the index correctly again.”

However, the equity strategist rules out the possibility that the prices of DAX companies could change significantly as a result. In this respect, the departure of Linde from the DAX is likely to have one beneficiary in particular: Commerzbank.