Reform of the leading index: the new Dax is taking shape

The week of the decision for the Dax is here.

On Friday evening, Deutsche Börse will announce who will be in the leading index from September 20.

There has never been such a large back of a chair.

After all, ten new places will be created in the Dax.

In future it should have 40 values ​​instead of 30 as it has been since it was founded in 1988. And some rules are changing.

Accordingly, it is currently heavily calculated who could make the qualification.

It boils down to a very tight decision.

Daniel Mohr

Editor in the economy of the Frankfurter Allgemeine Sonntagszeitung.

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It is clear who will not be accepted: the shooting star of the past few months among German companies, the Mainz corona vaccine manufacturer BioNTech.

The market value of more than 70 billion euros is now easily enough to leave established DAX stocks such as Adidas, BASF or BMW behind.

But BioNTech went public in New York and not in Frankfurt.

And a Dax stock does not necessarily have to have its legal headquarters in Germany, but it must be listed in the General or Prime Standard of the German stock exchange and achieve a certain minimum turnover in stock trading in this country.

This is not the case with BioNTech.

In the future, too, the Dax will not be a reflection of the most valuable listed companies in Germany.

Prevent Wirecard and Delivery Hero

All 30 previous Dax values ​​remain in the new Dax.

Stricter rules apply to them with regard to the supervisory board, but not until 2022. In addition, there should be harder and faster consequences if annual reports are not submitted on time and a company files for bankruptcy.

This was the origin of the current reform: the insolvency of the Dax stock Wirecard, which then remained in the leading index for excruciatingly long weeks.

Anyone who wants to move up to the Dax must have been profitable for two financial years in a row in the future.

This is seen as a reaction to the criticism of the inclusion of Delivery Hero in the Dax, as the company has been making losses throughout its business existence.

However, once you are in the Dax, you will not be excluded again because of a lack of profitability.

It will stay that way in the future.

By increasing the index to 40 stocks, the stock exchange is trying to diversify risk more widely.

Chemicals, old energy, banks, cars: important sectors in the Dax have all had problems in the past 15 years and have made the index look old in the truest sense of the word, not only compared to international comparison indices, also in-house: back to the beginning of 1988, the Dax has risen to this day (including dividends) from 1,000 to almost 16,000 points.

The M-Dax, however, from 1000 to 36,000 points.

The M-Dax now has to give its ten best values ​​to help the new leading index on the jumps.

The M-Dax is thus robbed by almost half of its market capitalization and reduced from 60 to 50 values.

Airbus becomes a heavyweight

The largest newcomer to the Dax will be the European aircraft and armaments company Airbus. So far, the old rules for trading turnover have failed, Airbus will immediately have around 6 percent weight in the Dax and the fifth largest Dax value. After the Berlin delivery service Delivery Hero became the first young, tech-based business model in the Dax last year, the Berlin online fashion retailer Zalando and the Berlin cooker box mail order company HelloFresh will follow in September. Another newcomer will be Symrise, an important supplier to the food industry - an industry that has not yet existed there. Sartorius and Siemens Healthineers have gained in importance as health values ​​in the corona pandemic and will be new in the index.

However, certain industries remain chemicals with 16 percent and automobiles with 11 percent. They too are getting reinforcements: Porsche Automobil Holding, the major VW shareholder, will be promoted to the Dax as well as the chemical company Brenntag. With Puma, a second sporting goods manufacturer should make the leap into the Dax.

It will be exciting about the 40th place in the index. In its calculations, on which our chart is based, the investment bank Stifel assumes a narrow lead for the German-Dutch biotech company Qiagen. Other analysts share this assessment, but emphasize that the lead over Beiersdorf is only a few tenths of a percentage point, which is 41st place of the average market value of freely tradable shares in the last 20 trading days, the data basis of the Deutsche Börse. This Tuesday is the last trading day included in the calculation, so a shift in favor of Beiersdorf would be unlikely, but still conceivable.

The new stocks make the Dax more colorful, and also a little younger. It is not a fundamental change. The ten new values ​​will make up roughly 17 percent of the index. A good 83 percent stay with the old ones. The price-earnings ratio in the Dax increases slightly, the dividend yield remains similar. In the future, however, the Dax will comprise more than 80 percent of the market value of all German stocks, the M-Dax only 11 percent instead of the previous 21 percent.

With a view to the index change, providers of exchange-traded index funds (ETF) will have a lot to do. You have to map the new index with its new weights precisely by September 20, and accordingly sell old Dax shares and buy the new ones. This does not change anything in the index level, not even in the assets of the ETF owners. You have “only” become co-owners of ten new companies.