Deutsche Börse is discussing a higher DAX cap

2023-10-12 08:40:20

Deutsche Börse is making a new push to reform its leading index, the Dax. In a survey among market participants, the Deutsche Börse Index subsidiary Stoxx once again asked whether the maximum weight of a stock in the DAX should be increased to 15 percent from the previous ten percent.

This cap is intended to prevent a company from getting too large a share of the index. Because the DAX is intended to reflect the diversity of the German economy. The stock exchange investors had already rejected a higher threshold in 2022; at that time, 58 percent were in favor of the current rule. The industrial gases group Linde took this as an opportunity to say goodbye to the German stock exchange and only have its shares listed in New York.

Linde turned its back on the Frankfurt Stock Exchange

The Linde board justified the departure primarily by saying that the rule had put additional pressure on Linde shares. Because of its continuous price gains, it repeatedly exceeded the ten percent mark. Because the stock market cut it back to ten percent once a quarter, they had to sell index funds that tracked the DAX.

The software company SAP is currently the most important value in the Dax with 10.17 percent. He is the only one to cross the threshold. In the past ten years, four DAX stocks have been capped a total of 38 times, explained Stoxx.

Market participants have until November 8th to express their opinion; the stock exchange plans to announce the results of the survey on November 22nd. The higher cap could then be introduced at the index review in March 2024. Two years ago, Deutsche Börse increased the number of DAX stocks from 30 to 40.

Dyrk Scherff Published/Updated: , Recommendations: 4 Achim Matzke Published/Updated: , Recommendations: 3 A comment from Daniel Mohr Published/Updated: , Recommendations: 4

At the same time, the stock exchange is discussing whether DAX stocks should also be capped outside of regular reviews in the future. This should be the case if their index weight rises above 20 percent. In practice, no DAX company has ever reached 15 percent in the past ten years. The highest value was 14.62 percent, it said in a presentation.