Seven key German companies fuel DAX nearly 19% rise
German stock market growth
Germany’s stock market has defied the economic gloom, with the Frankfurt Dax index rising 18.7% this year.
It has outperformed both France's and the UK’s benchmarks and far outpaced the STOXX Europe 600 index's 4.8% gain. Despite weak domestic growth and political instability, this surge highlights the resilience of some key players within the market, reports Financial Times.
Germany’s economy faces serious headwinds, including a forecasted growth of just 0.6% in 2025, a significant drop from earlier predictions. The country’s political turmoil also intensified in November, when the coalition government collapsed, leading to the announcement of snap elections in February. These challenges have not, however, hindered the performance of the Dax.
Timothy Lewis, a portfolio manager at JPMorgan Asset Management, noted that the DAX’s strong performance is "a surprise" and a clear example that stock market performance and economic health don’t always align. The DAX’s constituent companies, which generate less than a quarter of their earnings from within Germany, have benefited from international exposure, providing them with a cushion against domestic issues.
Key Companies Driving the Gains
This year’s stock market rally has been largely driven by seven companies: SAP, Rheinmetall, Siemens, Siemens Energy, Deutsche Telekom, Allianz, and Munich Re. SAP, in particular, has been a standout, accounting for nearly 40% of the DAX’s gains. Its share price has surged by more than 70% due to its successful transition of business customers to the cloud. It has become a bigger component of the DAX than the automotive sector, with Volkswagen and Mercedes-Benz both seeing losses this year.
SAP’s strong performance has been fuelled by the growing market demand for artificial intelligence-related stocks. The company has adjusted its earnings publication schedule to align with the US market to attract North American investors. In October, SAP overtook ASML as Europe’s largest technology company.
Additionally, Bank of America Securities reported that its clients continued to purchase U.S. equities for the seventh consecutive week, despite a 2% drop in the S&P 500 index during this period.
