German carmaker Porsche and sportswear maker Puma will join the nation's premier DAX stock index, as it expands to 40 from 30 companies in the biggest overhaul of its 33-year history, the exchange operator Deutsche Börse said on Friday, Sept. 3. 2021.
The DAX 30 is Germany’s flagship index, representing 30 of the country’s largest companies by market capitalisation. But following an announcement by the exchange operator Deutsche Boerse in 2020, it is set to become even larger when it switches to the DAX 40, incorporating ten of the largest companies from Germany’s MDAX listing.
The decision was made in conjunction with a set of further reforms to the German index, such as the toughening of corporate governance rules, following an accounting scandal at payment processing company and former DAX 30 constituent Wirecard.
Index additions
Potential additions to the index include aerospace giant Airbus SE, e-commerce operator Zalando, and global reinsurance group Hannover Rueck SE, with other likely additions including property company LEG Immobilien and Siemens Energy.
Components of the DAX 30 as of September 21, 2020.
Selection criteria change
While previously the DAX 30 considered stock exchange turnover for its rankings, now index members will be considered for liquidity levels instead.
New members will have to demonstrate the usual market capitalisation credentials, but now they must prove their profitability over their two most recent annual financial statements. This has implications for companies similar to Delivery Hero, which replaced Wirecard in the DAX 30 despite having never recorded a profit. Under the new rules, Delivery Hero would not be eligible.
How might the DAX 40 impact traders?
As mentioned, the expansion of the DAX 40 will mean more companies, more sectors, and the potential for revised weighting. This may mean giants such as software company SAP, which currently has the largest weighting in the index, may exert less influence over the DAX’s moves once the changes come in.
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