Dax share index is increased to 40 members – why?

D.he race is on. In September 2021, ten more Dax places are available. According to the current status, new entries would be made (in order of probability): Airbus, Symrise, Zalando, Sartorius, Qiagen, LEG Immobilien, Brenntag, Siemens Healthineers, Hannnover Rück and Hello Fresh. The list shows: There are no heavyweights buried deep at Deutsche Börse that are now being lifted for investors. They are often decent medium-sized companies with a few thousand employees. The German stock market simply doesn’t give you any more.

The Dax will in future represent 94 percent of the stock market values ​​in Germany. Such a concentration in the index is unique. In Japan, the 225 (!) Values ​​of the Nikkei make up 60 percent of the total market. In America the 500 values ​​in the S&P 500 are around 88 percent and in France the Cac 40 with its 40 values ​​each covers only 75 percent of the market. In Germany now almost full coverage. All power to the Dax is the motto of the stock exchange.

Not a large majority in favor of enlargement

To call it a blue-chip index is presumptuous in an international comparison. It goes well into the medium-sized stock market values. The M-Dax, which was previously intended for this, will be deprived of a third of its market value and reduced from 60 to 50.

Why the whole thing? It is the hope to cover the German economy more broadly, to get new, digital business models in the Dax sooner or at all. However, due to the low distribution of listed companies in Germany, it quickly reaches its limits. The enlargement was therefore highly controversial. Of the 10 points proposed as reform by Deutsche Börse, it was the one with the tightest acceptance rate. Of the 32 financial institutions that responded, 19 voted for and 13 against. Of 42 companies, 26 for and 16 against, and 3 out of 6 for business associations. The Deutsche Börse index company Quontigo evaluates this as the “large majority of associations for companies and financial institutions”.

The majorities for eight further points are clearer. Most of them improve the Dax. Many aim to prevent a Wirecard case in the future. Anyone who does not submit their quarterly or annual report on time in the future will be given 30 days to submit it and will otherwise be removed from the index via a “fast exit”.

Less power of speculation

This is very useful and obviously necessary. Investors must have the certainty that their companies cannot simply do without reporting and that subsequent proceedings, as before, take years and are only operated with warnings and threats.

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Another important change concerns the tradability of the shares. There will be a minimum requirement here in the future. In future, trading turnover will only play a role in the selection for the index, but no longer play a role. So far, the ranking was synonymous with the market value. This has given stocks that have been heavily speculated on over solid, unexcited companies. It’s good that that’s changed. Incidentally, also in the M-Dax, S-Dax and Tec-Dax. The new regulation has long been international practice.

On the other hand, the introduction of a profit obligation for companies that want to be included in the Dax should be viewed critically. They have to show an operating profit for two annual reports in a row, measured by the Ebitda, a parameter that leaves room for interpretation. This takes into account the widespread outrage that was revealed when the Berlin food supplier Delivery Hero was accepted in August. This has nothing to do with the idea of ​​the stock market. Innovative, rapidly growing business models are not always profitable from the start. But if the market trusts them to do this for the future and evaluates the company accordingly, then nothing speaks against a Dax inclusion.

Incidentally, the rule only applies to the Dax and not to the M-Dax, S-Dax and Tec-Dax. And it only applies to the recording. If a bank or a car manufacturer then slips into the red, he does not have to fear for the Dax’s whereabouts. The Tesla case shows how bizarre this can get. The world’s most valuable automaker is only now being included in the S&P 500 because it wasn’t profitable enough before. Too bad for investors in index funds on the S&P 500. You missed a large part of the capital gains.

Manufacturers of “controversial” weapons are still allowed to be included in the stock exchange’s selection indices. That is the only point that narrowly failed the market survey because the associations were against it. They refuse to mix sustainability criteria with traditional stock indices. In any case, it was not particularly consistent to single out a single point that was also moderately well defined.


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