Germany's DAX index grows from 30 to 40 firms in revamp

FRANKFURT: Ten companies will join the DAX on Monday as the blue-chip stock market index undergoes its biggest facelift in its 33-year history in response to turmoil in the German corporate world.

At the opening of the market in Frankfurt at 9:00 am (0700 GMT), the new entrants, amongst them European aerospace giant Airbus and online shopping company Zalando, will turn the DAX 30 into a DAX 40.

The index suffered a turbulent year in 2020 that saw national carrier Lufthansa drop out of the top tier under pressure from the coronavirus pandemic and the collapse of payments company Wirecard after revelations of large-scale fraud.

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Additions to the line-up are also meant to reflect the changing face of the German economy, bringing in tech companies like Zalando and the meal-kit supplier HelloFresh.

Both companies have benefitted from people staying at home more during the pandemic, buying clothes online and ordering in food.

The newcomers make the DAX "more attractive", said Norbert Kuhn from the German Stock Institute (DAI), which represents stock market participants.

A number of the companies in the DAX were "founded in the century before last", he said, and younger companies would give the index more "momentum" going forward.

Frankfurt stock exchange operator Deutsche Boerse was "following international standards" with a broader and longer list of companies that better reflected the German corporate landscape as the "concentration of automotive and chemical companies is reduced," Kuhn said.

Some of the new names are nonetheless familiar, including Porsche SE, which holds a large stake in top German car group Volkswagen.

Likewise, Siemens Healthineers joins parent company Siemens and spin-off Siemens Energy.

New rules

Deutsche Boerse and the DAX suffered a reputational blow last year after digital payments provider Wirecard admitted to a 1.9 billion euro ($2.2 billion) hole in its accounts.

Wirecard filed for insolvency, executives were arrested and its share price plummeted 98 percent before it was booted off the index, becoming the first DAX-listed company to fail.

New rules to better regulate entry into the DAX will be implemented during the expansion, with the aim of preventing another damaging scandal.

In particular, all companies hoping to join the elite will have to demonstrate an operating profit in the past two years -- a test not all current members would have passed were the rules to apply retroactively.

As the flagship DAX index grows, the mid-tier mDAX will shrink from 60 to 50 companies, as some of its members are promoted.

But the addition of 10 new companies is not expected to change the index's value significantly. DAX members will be given new weightings within the overall index, with Airbus the largest among the latest arrivals.