Porsche soaring from DAX index

In a significant shakeup of the German stock market, Porsche AG and Sartorius have been demoted from the prestigious DAX index, with GEA Group and Scout24 taking their place. This change, effective from September 22, 2023, follows a review by the Deutsche Börse of the composition of the leading index and other indices, such as the MDAX.

Porsche AG, the renowned sports car manufacturer, found itself demoted from the DAX to the mid-cap index (MDAX) due to a drop in its share price. After celebrating one of the largest IPOs in German economic history at the end of September 2022, Porsche's share price has since dropped to around 45 euros, down from almost 120 euros in the months following the IPO.

The automotive industry in Germany, including Porsche, is facing challenges such as the weakening Chinese market, problems with the sale of electric vehicles, and the trade dispute with the US. These factors have contributed to Porsche's significant decrease in profitability, leading to cost-cutting measures.

Sartorius, a pharmaceutical and laboratory supplier, has also been demoted from the DAX, moving to the MDAX. The company has suffered from the waning boom, high customer inventories, and a weak market in China, causing its shares to halve in value over the past three years. However, it's important to note that a drop from the Dax is not a one-way street; companies can potentially return to the leading index after being demoted.

Sartorius, on the other hand, benefited from strong demand for its products during the COVID-19 pandemic, particularly for the production of vaccines. Despite this, the waning boom for Sartorius refers to the decrease in demand for its products following the peak of the pandemic.

Being listed in the first German stock market league, the DAX, does not have concrete consequences for a company's business. However, membership in the DAX or MDAX brings prestige and increased visibility with international investors.

The DAX was expanded from 30 to 40 stocks in recent years, allowing for more companies to potentially return to the leading index after being demoted. The Deutsche Börse reviews the composition of the German leading index and other indices on a quarterly basis.

As for the newcomers, GEA Group is a multinational company that focuses on various sectors, including agriculture, food, and the pharmaceutical industry. Scout24, on the other hand, is a digital marketplace for real estate and automotive listings in Europe.

These changes in the German stock market indices reflect the dynamic and evolving nature of the economy, with companies rising and falling based on market conditions and performance.