Overview of the DAX 30 Stock Market Index

The DAX 30 Stock Market Index (full name the Deutscher Aktien IndeX, which means German Stock Index) consists of 30 large, blue-chip German companies trading on the Frankfurt Stock Exchange.

Just like the FTSE 100 and S&P500 it is a capitalization-weighted index so it essentially measures the performance of the 30 largest, publicly traded companies in Germany. It is, therefore, a strong indicator of the strength of the German economy and investor sentiment towards German equities.

Companies that Make Up the DAX 30 Stock Market Index

The DAX has been a relatively stable index with 16 companies of the original 30 remaining in the index since its inception in 1988

Bayer (9.99%) Munich Re (3.41%) Deutsche (1.39%)
BASF (9.81%) Volkswagen Group (3.27%) Merck (1.16%)
Siemens (9.09%) BMW (3.17%) Lufthansa (1.06%)
SAP (7.57%) Deutsche Post (2.61%) Heidelberg Cement (1.05%)
Allianz (7.36%) Adidas (2.48%) Infineon Technologies (0.98%)
Daimler (6.65%) RWE (1.9%) Beiersdorf (0.97%)
Deutsche Bank (4.67%) Henkel (1.89%) ThyssenKrupp (0.82%)
Deutsche Telekom (4.02%) Fresenius (1.85%) K + S (0.76%)
Linde (3.91%) Fresenius Medical Care (1.69%) Commerzbank (0.63%)
E.ON (3.80%) Continental (1.46%) Lanxess (0.60%)

*As at 30th September 2013

Companies are capped at a weight of 10% so legal provisions of the index are met and more importantly, any mergers and acquisitions do not lead to the emergence of an ‘index heavyweight’ that will massively influence the value of the index. The top five companies of the DAX (Bayer, BASF, Siemens, SAP and Allianz) make up over 43% of the index. When investing in the DAX it is therefore imperative to see how these companies are performing as well as their relative industry sectors (pharmaceuticals, chemicals, electronics, IT and insurance respectively).

Admission to the DAX

For a company to be included in the DAX 30, it must be listed on the Prime Standard – the Frankfurt Stock Exchange. A minimum of 10% of the company’s shares must be held in public hands for a company to be admitted along with a number of other trading rules.

A company will fall out of the DAX if it falls to 45th or lower in terms of market cap or it becomes insolvent and a company will enter the DAX if it rises to 25th or higher.

The Board of the German Stock Exchange (Deutsche Börse) will meet every quarter to determine the admission or exclusion of companies from the DAX.

The Value of the DAX

The index began with a base date of 30 December 1987 and a base value of 1,000. Over the years the DAX has seen a large number of takeovers, mergers, bankruptcies, and restructurings.

The DAX was in a bull market for an incredible 1,587 days between 2003 and mid-2007 with the value rising to 8,105.69 at its peak. Like most indices, it took a big hit during the credit crunch and in 2009 we saw it fall to 3,580. Since then we have seen the DAX bounce back and on the 19th September 2013, we saw the DAX hit its all-time record high of 8,736 following an impressive 2013 of an over 1,000 point gain.

The globalization of German companies has been an important driver of growth for many companies in the DAX and has been responsible for its strong performance over the years. Companies such as SAP, Henkel, Volkswagen, Adidas and Bayer among others have seen impressive growth in the US market as well as emerging markets in Asia.

Historical Performance of the DAX

A one-day line chart graphing the performance of the DAX from mid-2008 to September 2013

Things to Remember When Trading the DAX

  • The DAX futures contract is tradable from 6:01 – 19:59 (GMT), Monday to Friday.
  • The DAX moves in increments of 0.50.
  • The margin requirement for trading the DAX is usually about 2% (i.e. 50 to 1 leverage) with most brokers.
  • The minimum trade size is 1 index.
  • The currency of the DAX is the euro.

 

Trade Example

So let’s say we want to BUY 1 index of the DAX and it is currently priced at 8,600 and we have a Euro-denominated trading account:

The margin (or funds) we would need to put up to open this position would be €172.

(€8,600 (price of Dax) X 2% (margin requirement) = €172)

This amount can be seen in the ‘used margin’ section on our trading platform.

If we have an account in a different base currency such as US dollar, our margin remains 2% but our trading platform will automatically convert the €172 to US dollars.

So say the EUR/USD rate is 1.3500. We then see approximately $232 in the ‘used margin’ section on our US dollar account.

Every move in the DAX is 0.50 cent (euro) so in our example, if we bought 1 index and the DAX rises from €8,600.00 to €8,635.00 we make a profit of €35.00  (or $47.25 at a EUR/USD rate of 1.3500 for example).