What is the DAX 30 index? The Deutsche Akzien Index is calculated by Deutsche Borse AG and is one of the main indicators of the state of the stock market in Germany and the EU. The index was first calculated on July 1, 1988, on the Frankfurt Stock Exchange. Read about German stock exchanges here.
Drawing analogies with other stock indices, the DAX can be compared with the DOW 30 stock prices right now. What they have in common is not only the same number of companies in each index, but also their focus on traditional sectors such as manufacturing, pharmaceuticals, insurance, and retail. Innovative businesses in both the U.S. and Europe have separate indices.
Method for calculating the DAX
DAX is a modern index, and its calculation uses a more advanced method of market cap/float weighted, that is, in addition to the price considered, the capitalization of companies and the number of shares of each issuer in free float.
To calculate, the DAX uses a weighted average of the 30 largest German companies, and the plan assumes that dividend income will be reinvested in the same shares. In other words, the DAX is a total return index.
DAX index companies
In 1988, the greatest weight among the DAX index companies had banks, insurance companies, and the chemical industry, each of the three sectors weighing about 25% of the index.
Now, 30 years later, the technology and pharmaceutical sectors are the expected leaders. The software company SAP had the largest share of the index (10.56%) in 2019.
Back in the mid-90s, 78% of profits were generated in Europe; by 2012, that number had dropped to 52%, thanks to an almost fivefold increase in sales in Asian markets and a 30% increase in sales by German companies in the U.S.
Globalization and the emergence of new solvent markets are the main reasons for these changes.
The DAX index family
DAX has become the basis for an entire family of indices:
- MDAX;
- TecDAX;
- XDAX;
- SDAX.
Investing in the DAX Index
There are more than a dozen exchange-traded ETF funds that track the behavior of Germany’s main index. If you’ve invested in UK 100 index companies, you’ll have no problem here. You can buy them by opening an account with an overseas broker with access to European markets.
The average value of the funds is about 100 euros. It can be seen that they all show very close results (last column, one year’s return), and the difference results from the management fees. So, the fund with the maximum (but generally small) commission of 0.16% per annum, was the worst in the line, with a result of -6.28%. As of the first quarter of 2018, more than €29.2 billion had been invested in the index through various ETFs.
In the U.S. market, the most liquid is the iShares MSCI Germany ETF (EWG) with a current capitalization of $2.25 billion and a 0.47% commission. The latter is noticeably higher than in the screenshot — so although the fund was created back in 1996, the amount of funds raised here is lower than the two leaders in the euro equivalent. The fund tracks the German economy as a whole, but is highly correlated with the DAX. For more useful information, check out the Letizo news website.
