General presentation of the DAX 30 German stock market index:
Before anything else, we of course offer you the opportunity to learn more in detail about this stock market index and its general operation and function. An excellent knowledge of the DAX 30 is of course necessary to understand how its rate could move over the medium or long term.
The DAX is a stock market index that was created directly by the Frankfurt stock market. It should be remembered that this stock market is the most important in Germany as well as the tenth largest financial marketplace worldwide. It was on the 30th December 1987 that this stock market index was created with an initial quotation of 1,000 points. Another particularity of the DAX 30 index is that it is the oldest European stock market index on the worldwide financial markets.
In fact, the DAX 30 stock market index was created in the 1980s to replace an older index, the Börsen Zeitung, which was itself originally created by a German financial newspaper in 1959.
Later on and indeed over time, the Deutsche Böerse which operates the DAX has added other indices to the major index which is the DAX 30. For example there is the MDAX which lists the 50 largest German companies after those of the DAX 30, and the TecDAX, an index that lists the 30 top German companies specialised in the technology sector similar to that of the American Nasdaq index.
Some information relating to the German market is also important to know, particularly as Germany is the premier economic power in Europe and the fifth leading economy worldwide. This is notably due to the companies that are included in the composition of the DAX 30 stock market index which alone represent over 75% of the total stock market capital of the Frankfurt stock market. This information indicates why this index arouses such interest on the markets.
What is the composition of the DAX 30 stock market index?
As indicated by its name and as we mentioned earlier, the DAX 30 stock market index is composed of the 30 largest companies on the German stock market in terms of stock market capital. We can therefore note companies from various activity sectors. Contrary to what many may think, and although the German economy is often associated with the automobile industry, the companies found at the top of this classification are in fact companies related to the chemicals industry such as the Bayer Group and the BASF Group. Of course, the automobile manufacturers such as Daimler, BMW and of course Volkswagen are also present with strong positions in this index classification.
We would also note here that although the volatility of the DAX 30 index is particularly high the index comprises companies that are also particularly resistant. We also know that among the 30 companies that are included in this index, 17 have been included since its creation in 1988.
Here is a list of the companies included in the DAX 30 index at the beginning of 2021 with the respective weight of each:
- The Adidas Company from the sports equipment and clothing sector with a weight of 3.44%.
- The Allianz Company from the insurance sector with a weight of 7.84%.
- The BASF Company from the chemicals sector with a weight of 8.30%.
- The Bayer Company from the chemicals sector with a weight of 8.95%.
- The Beiersdorf Company from the consumer goods and chemical products sectors with a weight of 0.88%.
- The BMW Company from the automobile manufacturing sector with a weight of 2.71%.
- The Commerzbank Company from the banking sector with a weight of 0.91%.
- The Continental Company from the tyre manufacturing sector with a weight of 2.16%.
- The Daimler Company from the automobile manufacturing sector with a weight of 7.18%.
- The Deutsche Bank from the banking sector with a weight of 2.49%.
- The Deutsche Börse from the financial sector with a weight of 1.37%.
- The Lufthansa Company from the aviation sector with a weight of 0.73%.
- The Deutsche Telekom Company from the communications sector with a weight of 5.16%.
- The E.ON Company from the energy sector with a weight of 1.40%.
- The Fresenius Company from the health sector with a weight of 3.07%.
- The Heidelberg Cement Company in the construction sector with a weight of 1.34%.
- The Henkel Company in the consumer goods and chemical products sectors with a weight of 2.14%.
- The Infineon Technologies Company in the semi-conductors sector with a weight of 2.05%.
- The Linde Company in the gas industry sector with a weight of 2.90%.
- The Merck Company in the pharmaceutical sector with a weight of 1.36%.
- The Munich Re Company from the insurance sector with a weigh of 2.86%.
- The ProSiebenSat.1 Media Company from the media sector with a weight of 0.92%.
- The RWE Company from the energy sector with a weight of 0.73%.
- The SAP Company from the software sector with a weight of 8.91%.
- The Siemens Company from the electronics industry sector with a weight of 10.46%.
- The ThyssenKrupp Company from the production industry sector with a weight of 1.05%.
- The Volkswagen Company from the automobile manufacturing sector with a weight of 2.57%.
- The Vonovia Company in the estate agency sector with a weight of 1.43%.
Of course, the composition and classification of the DAX 30 index will and does change over time as certain companies exit the index and are replaced by others depending on their stock market capital.
What is the method used for the calculation of the DAX 30 index rate?
To further develop your knowledge we will now provide explanations on how the DAX 30 index rate is calculated.
Firstly, it is important here to remember the criteria necessary for a company to be included in the composition of this index. In fact to enter the DAX 30 index a company must be quoted on the Prime Standard sector of the Frankfurt stock market. It should also have at least 15% of its shares quoted on the stock market and held by the state and finally, it should have been listed on the stock markets for at least three years.
In order for a company to exit the composition of the DAX 30 index it will need to fall to at least 45th place in the classification in terms of stock market capital. Of course, a company that becomes bankrupt will also exit this index. It should also be remembered that every quarter, the German stock markets committee meets to discuss the admission and exclusion of companies in the DAX 30 index depending on the stock market capital and order volumes of the latter.
Regarding the actual calculation of the DAX 30 this depends on the stock market capitals of the companies and uses a methodology based on the floating principle which only takes into account the shares that are truly available. It should also be noted that each of the companies that is included in this index cannot account for more than 10% of this index.
Some information you should know before analysing the DAX 30 rate:
Before starting your analyses of the DAX 30 rate it is also necessary to know certain particularities and characteristics of this asset. In fact, it is not possible to buy parts of the DAX 30 in the same way you purchase shares on the stock markets and speculation on this asset is therefore completed through derived financial products.
It is also very important to note here that the DAX 30 Index displays a particularly high volatility, even higher than certain other international stock market indices. This therefore represents a risk for investors that should be taken into account. It should also be remembered here that historically the DAX 30 experienced a period of major growth during the initial years following its introduction onto the stock markets, passing the 2,000 points level in 1993 and increasing to 5,000 points to 1998 and finally 7,500 points in 2000. Between 2003 and 2007 the rising market enabled this index to reach its peak of 8,105.69 points.
Still from a historical point of view, we would also note that the DAX 30 has been particularly impacted by the speculative bubble at the beginning of the 2000 decade with a falling market over three years which led to a renewed drop of this index to 2,500 points with a gradual recovery since then.
The strong growth of certain German companies that are included in this index are responsible for this high volatility and should therefore be closely monitored.