Last week there was a celebration on the Frankfurt stock exchange floor: a good ten years after breaking the 10,000 point mark for the first time, the German leading index Dax has reached more than 20,000 points. This is an important milestone in the chronology of the DAX. It started with 1,163 points on July 1, 1988. The index is based on a concept by Frank Mella, then editor of the “Börsen-Zeitung”. The traditional F.A.Z. index, until then the leading index in Germany, was only calculated once a day after the stock market closed and therefore no longer met the requirements of the financial industry. From now on, they wanted to use indices as a basis for financial products and futures transactions. The DAX was initially calculated every 60 seconds, later every 15 seconds and now every second. In order to display external content, your revocable consent is required. Personal data from third-party platforms (possibly USA) may be processed. More information. Activate external contentThe start time for the Dax was good because the stock markets had just left the crash year of 1987 behind them. The subsequent recovery gave the DAX an increase of 33 percent in the first year. It took until 1993 until it closed at more than 2,000 points for the first time. When Deutsche Telekom, the largest IPO to date in Germany, took place in 1996, the Dax was at a good 2,700 points. A good three years later it was 8,000 points. Telekom’s share price had increased sevenfold during that time. However, those who rise high can also fall low. This was followed by the biggest downturn on the German stock market since the Second World War. The index fell to less than 2,200 points in March 2003. And as soon as it had exceeded 8,000 points again in 2007, the second biggest downturn followed with the financial crisis, which pushed the index down to 3,600 points by the beginning of 2009. After 2002, 2008 was the second year with an index decline of more than 40 percent. In the 37th DAX year, however, 27 years of price gains are compared to only ten years of losses. The annual average return including dividends is a good eight percent. In order to display external content, your revocable consent is required. Personal data from third-party platforms (possibly USA) may be processed. More information. Activate external content The Dax was initially designed to have 30 stocks, but today there are 40. The most important founding member was Daimler-Benz with almost twelve percent of the index, ahead of Bayer and Allianz. Of the ten heavyweights from the beginning, nine are still in the Dax. Frankfurt-based Hoechst AG passed into French ownership in 1999 and is now part of Sanofi. Bayer’s value later rose to the top of the DAX, but fell far behind after the loss-making takeover of glyphosate manufacturer Monsanto. Deutsche Bank, RWE, Veba (now Eon) and Volkswagen also said goodbye to the top group. In order to display external content, your revocable consent is required. Personal data from third-party platforms (possibly USA) may be processed. More information. Activate external contentSAP is at the forefront of today’s DAX members. The software company was not yet listed on the DAX when it was founded. It was added to the index in 1995. Such new entries are rare on the German stock market. Of the magnificent seven on Wall Street, all are younger than the SAP Group, which was founded in 1972. Three were only founded in the 1990s (Nvidia, Amazon, Google), two even after the turn of the millennium (Tesla, Facebook). At 52 years old, SAP is one of the younger companies in the DAX. Zalando remained in the ranks of tech start-ups in the Dax, Delivery Hero and Hello Fresh had to leave the index again after heavy price losses. The history of younger companies in the Dax is also modest. Wirecard is the most infamous example. Hypo Real Estate was also a big disappointment and brought losses for investors in the Dax, as did Pro Sieben Sat 1. Infineon has recovered after some bitter price losses, but is far away from high-flyers like Nvidia in the chip market. There has been a lack of such start-up stories in Germany over the past twenty years. In order to display external content, your revocable consent is required. Personal data from third-party platforms (possibly USA) may be processed. More information. Activate external contentFewer and fewer companies in Germany are listed on the stock exchange. In the 1950s there were almost 700 companies on the stock exchange, compared to today with barely more than 400. For years, the number of delistings has exceeded that of IPOs. Mergers and acquisitions caused companies to disappear, as did home-grown problems that led to bankruptcy. Entire industries have disappeared from the stock market. When the F.A.Z. index was founded in 1961, the textile, mining and brewery sectors were still well represented. But regulatory reasons also play a role in the stock market’s reluctance. From the public’s point of view, the effort of having to disclose figures every quarter and provide ad hoc information about price-related matters is a welcome transparency, but it sometimes stands in the way of prosperous and long-term successful corporate development. Many founders shy away from the effort and the constant critical gaze of the public, whose judgment can be seen in the share price every second. In order to display external content, your revocable consent is required. Personal data from third-party platforms (possibly USA) may be processed. More information. Activate external contentElsewhere, the capital market is used much more to finance companies. A look at the world stock market values shows that Americans, with a market capitalization of their companies of 63 trillion dollars, account for a good half of the global stock market values. Nvidia, Apple and Microsoft alone each have around ten trillion dollars, which is the same value as China, the second-placed country in the world stock exchange rankings. If it were only based on economic output, the USA would represent around 30 percent of the world. The stock market weight is also more pronounced than average in Japan and France. More on the subject Germany, however, accounts for a good 3.2 percent of global economic output, but the stock market value is a quarter lower. The USA shows how greater willingness to take risks in investing creates prosperity. Providing young companies with capital is a risk that does not always pay off. But if young companies often do not receive capital, as is the case in this country in a financing market that is heavily influenced by bank loans, then they cannot develop at all. Many founders therefore immediately turn their attention to the USA when it comes to financing. The good DAX development covers up this lack of depth in the German capital market. This may not matter for DAX investors, but it doesn’t matter for an economy.
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