The benchmark index of Germany, the DAX Index is all set to have its best year in 2012 since 2003. It is expected that the DAX will actually become the first national benchmark in the entire Euro region to surpass the 2007 peak of earnings this year. In 2012, the index has seen an increase of 29% on a whole, which marks the biggest advance out of all the developed markets, other than Greece. This is much higher than the 15% yearly increase of that of the Euro Stoxx 50 Index. The per share earnings on DAX is expected to be at 385.24 Euros after the end of 2013. This, if happens, will beat the 2007 price of 385.24 Euros.
In 2011, the DAX index experienced a slump of 15% as the investors were selling DAX as a proxy for the Southern European markets. Incidentally, earnings in most of the other prominent countries of Euro region declined in 2012 and the list includes Spain, France and the Netherlands. France’s CAC 40 Index has seen a decline of 6.3% in 2012. The declines for Italy’s FTSE MIB Index and AEX Index of the Netherlands are of 32% and 12% respectively.
According to Axa Investment Managers’ Equity Strategist, Mathieu L’Hoir, the rally of DAX is impressive and the cyclical & structural drivers are still there for the country. He added that the risk premium declines are yet to affect the German equities.
It is expected that DAX will increase by 13% in 2013, making it the best performing benchmark index in Europe. Incidentally, the German stock markets opened today after conclusion of the 3-day Christmas holiday period and have surged by 0.3% to finish at 7655.88.
The European Union predicts that German economy will expand by 0.8% in next year. On a whole, the combined economy of the 17 member of Euro region is expected to increase by 0.1%. Michael Quach, the Strategist of Smith & Williamson Investment Management Ltd. stated that DAX has been used by foreign investors to make both bearish and bullish bets on the currency zone’s economic and political development. Not only that the German companies have done well by benefitting from the exports, but, according to analysts, the DAX has also been helped by the effect of a sharp drop in the risk aversion.