Deutsche Börse wants to make the leading index more attractive
The German share index (DAX) will be increased by 10 to a total of 40 companies from September 20th. The MDAX, on the other hand, will be reduced to 50 companies.
Why this change after more than 30 years of Dax history? In the article you will learn the background.
The bankruptcy of Wirecard revealed weaknesses in the rules of the Deutsche Börse. Despite proven fraud and subsequent insolvency in June 2020, Wirecard remained in the DAX until the end of August. The reason were gaps in the rules. It was not possible to react ad hoc.
There was also criticism of Delivery Hero's rise to the Dax. The food supplier has never made any money since it was founded in 2011, but is now in the top tier of the stock market.
A realignment should prevent such cases in the future.
What are the new requirements for companies?
- Positive profit over 2 years
Only companies are now included in the DAX that, prior to their inclusion, can show a positive operating profit before interest, taxes, depreciation and other financing costs for at least two consecutive years. The key figure is also called EBITDA (earnings before interest, taxes, depreciation and amortization).
- Audited annual reports and quarterly figures
In addition, all DAX companies are obliged to publish annual reports and quarterly reports that have been approved by an auditor. If a company does not meet the relevant deadlines, it is automatically thrown out of the index.
- Market value instead of trading volume
Only the market value counts for inclusion in the DAX. The market value is calculated from the number of all freely available shares multiplied by the share price. In the past, the trading volume was also used. For this purpose, the turnover of all shares bought and sold over the past 12 months was calculated.
In future, new DAX candidates will also have to show a minimum liquidity of at least one billion euros in annual sales or one fifth of their market value.
- Good corporate governance
Since March 2021, all new DAX companies have also had to regularly demonstrate whether their management complies with the officially recommended principles of good corporate governance (Corporate Governance Code).
How often is the composition of the index checked?
So far, the composition of the DAX has only been checked once a year, in September. The index is now checked twice a year in March and September.
In addition, new rules were created to enable a quick exit or promotion to the DAX.
Which stocks will rise in the DAX?
On the evening of September 9th, the 10 climbers were announced. The following companies rise to the DAX 40:
- Siemens Healthineers
Why is it worth moving up to the DAX?
Professional investors or fund companies often have Dax stocks in their portfolios. Therefore, the trading volume of these stocks could increase.
Being a DAX member also helps companies to become better known and to strengthen their brand.
Which of the 10 DAX newcomers are a buy recommendation?
The shares of Porsche is currently (September 5, 2021) the best rated with a rating of 5 points. The Porsche share was recommended for purchase for the first time by TransparentShare on 02/02/2021 at a price of € 57.88. The share price is currently listed at € 87.84. It could be Yield of 51,76% be achieved.
TransparentShare automatically rates stocks with data-based key figures and recommends them for buying or selling.
All 10 stocks are already rated by TransparentShare. However, the changeover to the DAX will not officially take place until September 20th.
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