Soon 40 companies in the leading index: Will the MDax benefit from the Dax increase?

Internationally, the Dax is considered a "provincial index". The biggest reform since it was founded is intended to polish up its image: Ten companies from the MDax are promoted to the top tier of the stock market. Even so, the smaller index for small caps could be the big winner of the reform.

"It's just ten shares more," is how stock market expert Raimund Brichta describes the biggest reform in the history of the German benchmark index. What sounds important and profound actually has little effect: the increase in the Dax from 30 to 40 companies. The DAX already made up a large part of the entire German stock market capitalization at 30 companies, now it includes a few percentage points more, says the moderator of the ntv tele exchange in the podcast "Wieder was learned".

In September 2021, the Dax will grow to 40 companies. This is how Deutsche Börse plans it. Until then, the medium-sized companies will be racing towards promotion. Among other things, Airbus, Zalando, Siemens Healthineers, the health subsidiary of Siemens, Puma and Carl Zeiss are among the candidates who could soon play in the top tier of the stock market.

But why is there a reform? The purpose is that the German stock exchange no longer falls behind, but can be seen again. At least this is the sound of the stock exchange boss Theodor Weimer, who had been campaigning for the increase for some time – with reference to the leading indices in France and Italy, which are also 40 values. Or the EuroStoxx 50, the leading index for the Eurozone, which even includes 50 companies. The Dax will be brought into line with international standards as a result of the enlargement, according to the Deutsche Börse announcement.

Apple beats the "provincial index"

But the Dax does not gain in reputation through the increase. Raimund Brichta even calls it a somewhat exaggerated "provincial index", which even after its enlargement cannot compete with the real heavyweights in the international financial markets. The best example is the most important leading index of all, the American Dow Jones. It is also only 30 companies in size, but contains giants like Apple, which alone are worth the equivalent of a good 1.7 trillion euros. "The total value of all companies listed in the Dax is 1.2 to 1.3 trillion euros," says Brichta of the unequal conditions. "That shows that the Dax is not particularly important for investors."

Dax 13,114.30

This "provincial index" has also regularly suffered from minor and major scandals in recent years. Despite all the crises, Deutsche Bank is still in the Dax, as are the large companies in the automotive industry despite the diesel scandal. And until recently, of course, Wirecard too. The former star of the German corporate world made it from the acclaimed rise to the Dax to the edgy expulsion in less than two years. This scandal is the real reason for the reform, says stock market expert Brichta. Because in the future, all DAX members must always submit their balance sheets on time. "There is a 30-day period. If it has passed, a company can be kicked out. That was not the case with Wirecard," he explains. Presumably, in the course of this rule change, the other proposals were also included.

Because another new rule is indirectly related to the Wirecard bankruptcy. For the scandal company, Delivery Hero moved up in the German leading index in the summer, formerly known in this country as Lieferheld. A hip startup that lists restaurants on its website in 43 countries and delivers food for them. Soon you will also want to bring your customers food, flowers and medicines to their front door.

The plans are big, but the profits are poor. Or not even there: Delivery Hero has existed since May 2011, but the company has never made an operating profit since then. Only with lousies in the Dax? Even that should no longer be possible in future after the major reform. Two years of profit for admission are mandatory in the future. He thinks these regulations make sense, says Brichta. Deutsche Börse could have saved the rest – the increase.

Is the MDax the winner?

The MDax would certainly have been pleased. Because the increase in the leading index is at his expense. The small cap index shrinks from 60 to 50 medium-sized companies and is thus significantly devalued. The German Investor Relations Association (DIRK) has calculated that almost a third of its market capitalization will migrate to the Dax. He speaks of an "index technical dwarfing".

MDax
MDax 29,608.50

After its downsizing, the MDax will lose importance and interest, so the fear. But that doesn't have to be the case, says Raimund Brichta. Because the MDax used to be only 50 companies big for a while and still popular with investors. A calculation by Deutsche Börse even showed that without the ten largest values, retrospectively, it would have developed a tad better than it actually did, explains the expert. It may have shrunk back and deliver a slightly better performance in the coming years and ensure higher price gains than the Dax.

The leading German index is getting bigger and the MDax smaller. Ten companies are probably happy because they will be able to play in the top stock exchange league in the future. But only if they generate profits and report them reliably. Whether these changes will really increase interest in the DAX remains questionable.

You can find all the episodes of "Wieder Was Learned" in the ntv app, at Audio Now, Apple Podcasts and Spotify. You can use the RSS feed for all other podcast apps. Copy and paste the feed url and simply add "Again Learned" to your podcast subscriptions.

"Learned Again" is a podcast for the curious: Why can the little ant shake China? How is Nokia bringing the LTE network to the moon? Why is the Rhine "rebuilt"? Listen to it and get a little smarter 3 times a week.

. (tagsToTranslate) Economy (t) Dax (t) MDax company (t) Dax company (t) Exchange operator