What is the DAX 30?
The Deutscher Aktienindex, or DAX, is a blue chip stock market index comprised of the 30 major German companies trading on the Frankfurt Stock Exchange. The DAX stock market makes up approximately 75% of the Frankfurt Stock Exchange, and so can be used as a rough indicator for the broader German economy. It was founded in 1987, using the base date of 30 December 1987 (with a base value of 1,000). The DAX trades between the hours of 09:00 and 17:30 CET. The DAX share price tends to be considerably more volatile when compared to UK and US stock markets.
How is it constructed?
To be considered for the DAX 30 index, a company must trade at least 15% of their market cap in the stock markets and have been listed for a minimum of three years. As well this, the company must also: belong to the ‘Prime Standard’ segment on the Frankfurt Stock Exchange and represent the German economy. To qualify for the ‘Prime Standard’ portion of stocks a company must meet strict requirements that govern transparency and are imposed by German law. Any company listed on the DAX, the German stock market, that fails to meet the Prime Standard requirements will be demoted to ‘General Standard’, and would be unable to feature on the DAX, MDAX, TecDAX or HDAX indices.
The DAX index is capitalisation-weighted, meaning that companies with bigger market caps will have a larger influence on the index’s value. However, note that no one company can have a weighting of more than 10% to be listed on the index.
The companies that comprise the DAX are reviewed every quarter, and companies are added or removed based on their market cap and order book.
Brief DAX index historical data overview
The DAX index was first published on the Frankfurt Stock Exchange on 1 July 1988. Frank Mella, who was then editor at German newspaper Börsen-Zeitung, is credited with the DAX’s conception, after his publisher gave him the task of devising a German stock market index .
The operator of the DAX 30, Deutsche Börse, has added several other related indices since 1988. Such as: the MDAX, which represents the 50 biggest companies after the DAX; the TecDAX, which represents the 30 biggest technology companies outside the DAX; and the HDAX, which combines the DAX, MDAX and TecDAX.
DAX historical data and price history: Booms and busts
The DAX is a renowned for being a volatile market, and since its foundation, has had various rallies and crashes affecting the DAX historical chart and performance. Some are specific to the index, others global phenomena.
1. German reunification
The started as a benchmark for the West German economy. The fall of the Berlin wall in 1989 paved the way for the reunification of East and West Germany that became a single state in 1990 – this was the first time in history that a capitalist and socialist economy had suddenly become one, and with no real guidelines or history to draw from, this was a turbulent time for the German economy.
Going into the reunification, the DAX rose 60% since its inception, but with political tensions rising, the DAX began to fall and lost 13% in seven weeks. By the end of March 1990 the index had recovered and hit new highs. As the process of the reunification of both sides continued, there was a consolidation period with the DAX, where the index didn’t reach the March 1990 highs until March 1993. From this point the index rallied until 1998, where the collapse of Long Term Capital Management (a hedge fund) rippled through Western markets.
2. Russian Financial Crisis
In August 1998, Russia experienced a financial crisis (due to declining productivity, artificially high fixed exchange rates and a chronic deficit) resulting in the Russian government and Central Bank devaluing the ruble and defaulting on debt. This had a ripple effect throughout Europe. Germany was disproportionately affected by this because, at this point in time, it was the largest lender to the Russian economy. Consequently, the DAX performance suffered.
3. Creation of the euro & the dotcom bubble
The big boom after the Russian financial crisis didn’t occur until the creation of the euro in 1999, providing stability across the newly formed eurozone. The index went into the millennium reaching new DAX 30 performance highs of 8,215, climbing 27% in 10 weeks due to the enthusiasm surrounding technology stocks.
4. Dotcom crash
The dotcom crash started in 2001 when it became clear that the technology sector had been in a bubble and wasn’t producing expected results. The DAX plummeted to 4,115.
The losses in 2001 were further worsened by the 9/11 terror attacks in New York in September, which hit global markets hard. The DAX fell to 3,808. From the March 2001 to the lows of the 2003 period, with a value of 2,463.6, the DAX had dropped 73%. After this, the market began to make steady gains.
6. Angela Merkel
In 2005 Angela Merkel was elected as German chancellor, being the first woman to hold this position. Merkel inherited a German economy with high unemployment, hitting 12.6% in 2005 (the highest since Hitler came to power in 1933) and a budget deficit of 3.5%. She was a popular chancellor from day one, under her coalition-government both GDP and employment rose steadily. Merkel soon had the connotation of being economically sound and a strong leader, being able to command the grand (cross-spectrum) coalition. It was arguably this security that provided a strong level of certainty in the economy and this formed the basis for a continued rally under her leadership. This was, however, up until the financial crisis of 2007-08.
7. Financial crisis 2007-08
Beginning with the US subprime mortgage crash in 2007, the global economic crisis of 2007-8 was arguably the worst period of economic turmoil since the Great Depression in the 1930s. Banks were going under, and people were losing faith in the financial system as a whole. Despite government bailouts, many countries experienced long recessions, and stock markets free feel. Between 2007 and 2008 the DAX lost over half its value, 55.9% bottoming out at 3,585.1, as the German economy struggled after its fall-out from the global economic crisis.
8. European sovereign debt crisis
While Germany was still recovering from the aftermath of 2008, eurozone countries were struck with another crisis. Countries, like Greece, Italy and Portugal who borrowed large sums of money to increase fiscal stimulus post-recession, were unable to pay back the loans to fellow eurozone members. This not only threatened the stability of the euro put also put strain on a lot of eurozone economies. In August 2011, the European sovereign debt crisis took 33% off the DAX’s previous high. After this, the index hit a new high of in 2013, breaking the 9,000 mark on the DAX historical chart.
From this point onwards there was high volatility with further eurozone problems and concerns surrounding China. Despite this, the DAX hit another record high in 2015 of 12,398. At the end of 2017, the DAX hit the 13,000 mark.