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Germany’s DAX Index price reweighting to include 40 shares


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Germany’s DAX Index price will look to include more stocks to better reflect the underlying economy.

DAXSource: Bloomberg
 
 Shaun Murison | Senior Market Analyst, Johannesburg | Publication date: Tuesday 07 September 2021. IG

What changes are being implemented for DAX Index?

Deutsche Boerse AG, the operator of the FrankFurt exchange in Germany will look to increase the number of stocks which make up the blue chip DAX index from 30 to 40.

When will the DAX30 become the DAX40?

The rebalancing of the index is scheduled to take place by 20 September 2021.

Which new securities will be added to the new DAX40 index?

A list of expected additions to the new DAX40 index are as follows:

Which DAX30 companies will make up the new DAX40 index?

All of the existing DAX30 index constituents will form part of the new DAX40 index. The following table shows the make up of the DAX30 currently.

Allianz

Adidas

Continental

Deutsche Telekom

Deutsche Wohnen

Vonovia

BASF

E.ON

Deutsche Boerse

SAP

Deutsche Wohnen

Fresenius Medical Care

Siemans

Münchener Rückversicherungs-Gesellschaft

HeidelbergCement

Bayer

Fresenius SE & Co.

Merck

Daimler

Volkswagen

MTU Aero Engines

Infineon Technologies

Deutsche Bank

Covestro

BMW

Henkel AG & Co.

Siemens Energy

Linde

RWE

Delivery Hero

 

Other recent changes to the DAX index

Since the announcement that the DAX30 Index would become the DAX40 index, the Deutsche Borse has been implementing further regulatory changes for inclusion of blue chip companies into the index. These changes have been rolling out since December 2020 and include requirements such as having the most recent two of years financial reporting reflecting positive EBITDA (earnings before interest, taxes, depreciation and amortisation), more stringent financial reporting requirements and sanctions introduced for non-compliance.

Why are changes being implemented on the DAX?

Increasing the number of securities which make up the DAX is expected to provide more liquidity to a broader set of shares, and is expected create a better and more diverse representation of the broader German economy.

How will the DAX change affect traders?

The DAX30 will be renamed to the DAX40. On the IG platform, the Germany 30 will be renamed the Germany 40. Traders of the index will be able to trade it the same way as they did before, and the initial change to cash and futures prices should be marginal.

The new diversity created by having more securities in the index should dilute the impact of sudden large moves by individual securities on the index price. Traders looking to use the DAX to hedge underlying portfolio’s might see a larger correlation to more securities than before.

DAX30 – technical analysis

DAX chartSource: IG charts

 

The long term trend for the DAX30 (Germany 30) remains up. In the near term the price is consolidating within a range between levels $15730 (support) and $16020 (resistance).

Traders respecting the long term uptrend will want to keep a long bias to trades on the index. Long entry might be considered on an upside break of the $16020 resistance level, or on a retest of either horizontal or trend line support. Only on a move below the major low considered at the $15065, would we reassess the longer-term trend bias.

Summary

  • The DAX30 will become the DAX40 by 20 September 2021
  • The new index weighting will provide a broader representation of the German economy
  • The new index should provide increased liquidity to more companies on the German stock exchanges
  • Stricter index inclusion criteria have been introduced by the Deutsche Borse
  • The long-term trend for the DAX remains up
  • The DAX trades in a rangebound fashion over the near term

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