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Dax ad on the Frankfurt Stock Exchange:
The leading index grows to 40 values - no reason for investors to be active, say experts
Photo: Boris Roessler / dpa
The most comprehensive index reform that Deutsche Börse has carried out to date will take effect next Monday. Most important change: The leading index Dax grows from 30 to 40 companies, the MDax for the next smaller values shrinks from 60 to 50 companies at the same time. As the stock exchange decided a few weeks ago, the shares of Airbus, Brenntag, Hellofresh, Qiagen, Sartorius, Siemens Healthineers, Symrise, Porsche Automobilholding, Puma and Zalando will switch from the MDax to the Dax in one fell swoop.
Investors who have funds in their portfolios that are focused on the Dax or the MDax - for example corresponding index funds or ETFs - can therefore ask themselves the question: should they react to these changes? Will the MDax funds possibly lose importance in favor of the Dax funds, so that a corresponding shift from one investment vehicle to the other would appear advisable?
According to investment experts, the reform has an impact on the character of the leading index Dax. "The Dax is taking a small step from dividend index to growth index," commented Silke Schlünsen, index expert at the US investment bank Stifel, in the run-up to the expansion. "Among the new members are some high-growth future companies that will enrich the index." This will make the Dax more attractive to foreign investors and could get a boost from the inflow of funds from global investors.
Companies that the index connoisseur should keep an eye on in her assessment are, for example, the cooker box supplier Hellofresh or the online retailer Zalando. Both are still comparatively young companies from the technology sector that are still in their growth phase. The advance praise that they are currently receiving on the stock exchange - measured by the price-earnings ratio (P / E) - is correspondingly high. According to Burkhard Wagner from asset manager Partners Vermögensmanagement in Munich, the high P / E ratio of such papers, which are between 40 and 80, should mean that the Dax as a whole will receive a higher valuation on average in the future, i.e. that it will de facto be more expensive. "In return, the MDax is cheaper on average."
Newcomers make up 13 percent of the Dax - and 44 percent of the MDax
Ben Laidler, Global Market Strategist at the online broker eToro, also judges that the Dax's branch diversity will be improved by including companies such as Hellofresh, Zalando or the medical technology company Siemens Healthineers and the diagnostics specialist Qiagen.
The index retains its cyclical character, however, because economically sensitive sectors such as the chemical and automotive industries continue to dominate.
"In the past it was the classic sectors such as insurers, banks, mechanical engineering and industry, cars, real estate and energy - the Dax primarily showed what is produced in Germany," says Markus Zschaber from asset manager VMZ. "But times are changing, service providers from the areas of software, internet and health are pushing forward step by step, are becoming more and more important for Germany's economy and offer growth impulses."
Apart from the change in the industry mix, the Dax reform leads to measurable weight shifts in the indices. The ten new companies together - above all the new heavyweight Airbus - will have a weight of around 13 percent in the Dax right from the start, as index expert Christian Kahler from DZ Bank has calculated. In the MDax, the consequences of the exits appear even more significant: The ten companies that leave the index together made up around 44 percent of the mean value index - a large gap that the remaining 50 companies have to fill.
In short: The Dax reform is apparently leading to significant changes in the Dax and MDax - but what does that mean for investors? The majority of the investment professionals surveyed by manager magazin are of the opinion that private investors should hardly react to the shifts. "As an index, the Dax continues to show the performance of the largest German corporations, and the expansion to 40 companies does not change that much," says Joachim Schallmayer, Head of Capital Markets and Strategy at DekaBank. "The attractiveness of the MDax as an index for companies with growth potential may even increase, because the shares of Airbus, for example, which previously dominated the index, are now falling out. This increases the influence of other securities on the index performance."
"A reallocation is not necessary," says Maik Bolsmann from asset manager B&K Vermögen in Cologne.
"The Dax is and will remain the absolute heavyweight, it already represented the lion's share of the stock market investable share capital, in the future it will be 80 percent."
Alexander Reich also does not believe that investors will have to shift their portfolios due to the Dax reform.
"If an investor is invested in Germany, he should keep a distribution on Dax and MDax investments," says the portfolio manager of the asset manager PVV in Essen.
Reich also emphasizes the special price opportunities of the MDax, which in the past meant that the mid-cap index overshadowed its big brother in a performance comparison. "Mid-cap companies like those represented in the MDax can continue to make an above-average contribution to performance," he says. It is true that the more liquid large caps, as they are also listed in the Dax, are often preferred on the market. "Basically, however, I remain of the opinion that companies with a smaller market capitalization, which are also not always in the global investor focus, offer solid price opportunities."
And: Reich addresses the tendency of investors to prefer to invest in the home market - a mistake, as many investment experts believe.
"Basically and independently of the Dax reform, private investors should think about the distribution of their assets," he says.
"Private investors tend to prefer their home market and fail to diversify across different countries or regions."
In other words: The Dax reform does not make it necessary to change the weighting of Dax or MDax funds in the portfolio.
Perhaps, however, it is a good reason for investors to think about whether they have already taken sufficient account of the allocation beyond the German borders.
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