Delving into Europe’s stock markets: The Dax

Julie Brownlee, Fsp Invest, 07 Apr. 2015

Tags: stock markets, the dax, german economy, german stock exchange, frankfurt stock exchange, what is the dax, dax 30, companies on the dax,

If you want to look at Europe’s largest economy, you need to focus on Germany. As well as being the largest economy in Europe, it’s also the fourth largest in the world.

So what about the stock market of this European power house?

Let’s take a closer look at the Frankfurt Stock Exchange’s blue chip index, the Dax…

What is the Dax?

The Dax is the stock market index that represents the top 30 companies listed in Germany. This is why it’s sometimes called the Dax 30.

The Dax works a bit differently from other indexes on major stock markets. It’s a total returns index. What this means is its performance takes into accounts reinvested dividends.

The majority of the major indexes across the world are price returns indexes. This means they only measure capital gains. In other words, the rise in share prices of companies on an index.

If you want to compare the Dax with other blue chip indexes around the world, it’s important to remember this as it does have an impact on long-term returns.

The characteristics of the Dax

The Dax is extremely exposed to what’s going on in the German and global economy. This is down to the heavy presence of German companies overseas.

Have a look at the chart below of the sectors that make up the Dax…

Chart of the sectors on the Dax

Cyclical companies account for 80% of the index.

The consumer goods sector, which contains car and car part makers, accounts for 23.81% of the Dax. Next is the basic materials sectors, making up 22.83%.

The Dax’s largest defensive sector is telecommunications. But this accounts for just 5.46%.

There are many familiar company names on the Dax, including:

  • Adidas;
  • BMW;
  • Deutsche Bank; and
  • The Volkswagen Group.

So there you have it, the German blue chip index, the Dax.

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