The DAX in Germany is struggling as the index expands from 30 to 40 companies.
In early trading on Monday, the DAX plummeted 2.6 percent to its lowest level since July, as market turbulence hampered the expansion of the German blue-chip stock market index from 30 to 40 businesses.
The majority of the DAX’s 10 new businesses were down shortly after 1100 GMT, with aerospace giant Airbus and e-commerce company Zalando both falling around 4%, but the redesigned index’s value remained at 15,080 points.
According to Andreas Lipkow, analyst at Comdirect, the “euphoria over the new DAX has fizzled out after one day of trading” due to the negative development, which was fueled in part by the troubles of Chinese real-estate behemoth Evergrande.
The new additions are meant to revitalize the index following a tumultuous 2020 that saw national carrier Lufthansa leave out due to the coronavirus pandemic and payments company Wirecard collapse due to large-scale fraud revelations.
With the addition of tech businesses like Zalando and meal-kit provider HelloFresh, the new line-up reflects the changing face of the German economy.
People staying at home more during the pandemic, buying clothes online, and ordering food in have benefited both companies.
According to Norbert Kuhn of the German Stock Institute (DAI), which represents stock market participants, the entrants make the DAX “more appealing.”
He claimed that a lot of the DAX’s companies were “established in the century before last,” and that newer companies will offer the index more “momentum” in the future.
As the “concentration of automotive and chemical businesses is reduced,” Frankfurt stock exchange operator Deutsche Boerse was “following worldwide standards” with a broader and longer list of companies that better reflected the German corporate landscape, Kuhn said.
Some of the new names are known, such as Porsche SE, which owns a major part in Volkswagen, the top German automaker.
Siemens Healthineers, like its parent firm Siemens and spin-off Siemens Energy, is part of the Siemens group.
Last year, digital payments operator Wirecard acknowledged to a 1.9 billion euro ($2.2 billion) hole in its records, causing the Deutsche Boerse and the DAX to suffer a reputational damage.
Wirecard filed for bankruptcy, executives were arrested, and the company’s stock price plunged 98% before it was delisted from the DAX, making it the first DAX-listed company to fail.
During the expansion, new rules will be imposed to better regulate admission into the DAX, with the goal of avoiding another disastrous incident.
All companies wishing to join the elite will have to show an operating profit in the previous two years – a criteria that not all present members have passed. Brief News from Washington Newsday.