The DAX ETF (Lyxor) is quoted in Euro, and replicates the DAX 30 index, which is composed of the 30 largest German stocks representative of the main sectors of the market, while stocks are selected according to the size of their market capitalization.
The expenses of this ETF are low at 0.15% and the AUM is rather high at around € 1040M. The replication method is direct (Physical) and the distribution of dividends is made by capitalization.
Index & components
The top 10 stocks are mainly large industrial stocks such as Siemens or Bayer, while only two financial stocks are present: Allianz and Deutsche Post, the German index is relatively narrow and consists mainly of large groups.
Unlike the English, French or Italian indices, the DAX is also distinguished by the absence of large oil groups that weigh heavily on the CAC40, FTSE100 or FTSEMIB40, which is a significant factor depending on the sector momentum. Moreover, financials weigh only 16% of the index, half of which for the insurance giant Allianz, the banking sector therefore has a low weighting reflecting the weakness of Deutsche Bank and Commerzbank. Conversely, the automotive and chemical sectors weigh heavier than in the other European indices, while the technology sector is mainly represented by SAP.
In summary, the DAX is a fairly marked index from a sectoral point of view, which can make it evolve differently from other European indices. German fundamentals are very strong (GDP growth around 2%, historically low unemployment at less than 6% and accelerated deleveraging planned until 2020). The main risks concern Germany's main customers, namely the UK, which could suffer from Brexit, the US in political uncertainty and threatening it with a trade war, Russia remains a difficult and aggressive neighbor and China because of its business practices.
Note that dividends are capitalized, unlike the CAC40.
Latest developments
After an increase of 6.9% in 2016, the DAX30 rose by 7.2% since the beginning of the year, slightly more than the Stoxx600 (+ 6.3%).
The French elections have reinforced the euro zone, clearly a positive for Germany which will see its own elections to be held on 24 September with less stake because the 2 main CDU / SPD parties remain dominant on the domestic scene and a coalition is a likely outcome.
The German automotive sector has been in a state of turmoil since the Wolkswagen scandal, and German manufacturers are now in the spotlight of European competition authorities after the revelations of a possible illegal cartel involving Volkswagen, BMW, Audi, Porsche and Daimler. Car manufacturers could be fined up to 10% of their turnover, if the collusion was proven. However the impact of this news was limited on the market, and the European automotive sector posted the best performance last week.
