The 10 newcomers – in order of market value – are Airbus, Zalando, Siemens Healthineers, HelloFresh, Symrise, Sartorius, Porsche Automobile Holding, Brenntag, Puma and Qiagen.
The most important selection criterion was the market capitalization of companies on the basis of diversified holdings over the last 20 trading days of August, which means that equity portfolios of more than 5% of the aggregate value n ‘have not been taken into account.
Another important entry criterion: DAX-listed companies must now record profits – a crucial lesson learned from the Wirecard accounting scandal.
What is the impact ?
Experts do not expect major fluctuations in stock prices due to the larger German stock index. What is true is that DAX linked equity funds will need to reflect changes in the composition of the index. But large institutional investors have already taken stakes in new DAX members in recent weeks, as most of the names of the newcomers have been known for months.
The expansion of the DAX is a useful step, says Jürgen Kurz, spokesperson for Germany’s leading association of private investors, DSW. He notes, however, that the index is still quite heavy for the industry, with only Zalando and HelloFresh joining Delivery Hero in the online retail section.
Joining the health services industry are Siemens Healthineers, vaccine supplier Sartorius and biotech company Qiagen. Symrise is the first DAX company to represent the food and beverage industry.
A lot is still missing
DZ Bank investment strategist Christian Kahler, however, criticizes the fact that innovative companies such as BioNTech are not included in the DAX index. “We don’t have any big IT or tech companies in the top index other than SAP and Infineon – that’s a big drawback for the German market compared to the US for example,” he told DW.
The 10 new arrivals do not solve yet another problem. In almost a quarter of all boards, women are absent altogether, with just seven new female leaders joining the boards of DAX companies. Merck boss Belen Garijo remains the only female CEO of a DAX-listed company.
Robert Halver, capital markets analyst at Baader Bank, says that further expansion of the DAX to, say, include 50 companies, would already be a major challenge because the market value of other companies is far too low. “We just don’t have more shooting power in Germany in that regard,” he said.
Germany still lacks a culture of fairness which is evident in Anglo-Saxon countries. About 90% of all businesses are family owned. These are mostly small or medium-sized enterprises (SMEs), but combined they account for 52% of the revenue recorded by German companies as a whole.
Among these companies are many world leaders in their respective fields of activity, such as auto parts supplier Bosch. Halver says these companies generally hate to adhere to the strict rules that apply to listed companies. “They prefer to work undisturbed instead of submitting a detailed interim income report every three months.”
Merck CEO Belen Garijo is still waiting for a second female leader to head German company DAX
MDax now lower?
It’s not yet clear whether the DAX widening will hurt the smaller MDax index, experts say. The MDax includes mid-sized companies and is now growing from 70 to 60 members. “The former 10 heavyweights of the index are gone,” said Halver, which, he added, could mean a temporary weakening of the index.
On the other hand, the remaining MDax companies are often much more flexible and show a much more dynamic profit trajectory. Recent developments clearly show this. While the DAX has risen from 1,000 points in December 1987 to around 16,000 points today, the MDax has climbed to some 35,000 points, starting from the same level as its big brother.
This article has been adapted from the German original