HotHotHot: Germany and the DAX 30
On March 16, 2015, Germany’s DAX 30 surpassed 12,000 for the first time in history, closing out at 12,167.72. As of March 24, 2015, the index dipped a bit to 11,895.00, but this figure is still far above any previous marks for the DAX 30.
The rise in the index represents a 30 percent gain over the past 12 months and an astounding 22.44 percent gain over the past month. As late as January 7, 2015, the index was below 10,000 and was below 11,000 as late as February 10. The DAX 30 started in 1987 with a base index number of 1000. Its present value is now 12 times the baseline.
The DAX 30 is an index of 30 German blue chip stocks, similar to the Dow Jones Industrial average in the New York Stock Exchange. Some of the major German corporations comprising the index are Adidas, Deutsche Bank, Volkswagen, BMW and BASF.
One of the factors cited as a reason for the rise is a recent quantitative easing (QE) by the European Central Bank, utilizing 60 billion Euros per month. The drop in the value of the euro has created a buyer’s market for bonds in German companies. Quantitative easing is an economic policy used by a country’s central bank.
With QE, the central bank will purchase assets of commercial banks for the purpose of increasing their value and create more liquidity into the hands of the commercial banks. In the case of German companies and the DAX 30, the policy has undoubtedly exceeded expectations. How long the policy will have a beneficial effect on the stock index is up to speculation but the QE has definitely produced a much needed boost to the German stock market and commercial markets as a whole.
But while the QE policy should be credited, equally important factors have helped in the surge. Several of the companies on the DAX 30 have seen a recent surge in product sales, including Volkswagen, BMW, Seimans and Adidas. These companies have not only experienced stock gains, but increases in sales.
Earnings in overseas markets have especially boosted sales. This is no doubt due in part to the low value of the Euro. However, German companies have exceeded the growth of other companies under the Euro.
The bond market and the low valuation of the Euro definitely contribute to this increase in sales, but cannot be considered the only factor involved. German car companies have shown a particularly substantial rise in sales, with VW, BMW, and Daimler consisting of 3 of the top 4 producing stocks on the index.
Jeff Ramson, Founder and CEO of ProActive Capital Group (PCG), LLC, has a reputation for innovation.