Delving into international stock markets: The ins and outs of the Dax

Julie Brownlee, Fsp Invest, 06 Aug. 2014

Tags: dax, german stock market, stock market, international stock market, what is the dax,

The world over, countries have their own stock markets.

In South Africa, we have the Johannesburg Stock Exchange. If you want to see what the largest companies in South Africa are doing, you can look at the performance of the Top 40 Index.

This is South Africa’s 40 biggest companies listed on the stock market.

The Top 40 Index is a good barometer of what’s going on with these companies share prices and their performance.

So let’s take a look at a similar index further afield: The Dax in Germany…

The Dax contains Germany’s 30 largest companies

Germany’s version of the Top 40 Index is the Dax. It’s Germany’s blue chip index. It consists of Germany’s 30 biggest listed companies.

What makes the Dax stand out is it’s one of the most cyclical markets in the developed world. This means these companies are very sensitive to what’s going on in the economy.

Around 80% of the companies on the Dax are businesses in sectors that are very sensitive to the ups and downs of the economy.

Have a look at the chart below:

The Dax by sector

The Dax’s performance reflects the economy’s performance

You can see that companies in the basic materials sector, the largest sector, make up 24.12% of the DAX. This is a cyclical sector. This includes chemical businesses.

Companies in the consumer goods sector make up 22.66% of the Dax. Dominating this sector is firms that produce cars and car parts. This is also a cyclical sector. For instance, when the economy isn’t performing well, consumers will be less likely to buy new cars.

The personal and household goods are defensive. In other words, the sector is pretty immune to what’s going on in the economy. But this only accounts for a small fraction of the market.

Strongly influencing the Dax is what’s going on outside of Germany. This is because the companies on the Dax sell about 75% of their products abroad.

If global economic growth is strong, the Dax stands to benefit.

So there you have it, the ins and outs of the Dax.

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