The DAX 40, also known as the DAX Index, is a blue-chip stock index following the largest German companies listed on the Frankfurt Stock Exchange. It’s also a reliable indicator of the country’s economic strength. It’s considered to be the benchmark stock market index for the German economy.
What Is the DAX 40?
The index tracks the 40 largest German companies in terms of market cap and liquidity. DAX is short for Deutscher Aktien Index 40 and it was established with a base value of 1,000 in 1988. Since 2006, the Xetra trading venue has been computing the index’s price every second.
When the DAX 30 became the DAX 40 on September 20 2021, the Deutsch Boerse admitted ten more companies to the index, meaning a slightly broader range of sectors covered, as well as other regulatory provisions. The DAX 30 became the DAX 40 on September 20 2021.
Additions to the index were Airbus, Zalando, Siemens Healthineers, HelloFresh, Symrise, Sartorius, Porsche Automobile Holding, Brenntag, Puma and Qiagen.
The DAX is a performance-based index as it incorporates data on company dividends, capital income and cash outflow, which are included in the net stock price, while a pure price index would overlook corporate distributions.
Similar to DAX, other blue-chip stock indexes are the CAC 40 in France, the FTSE 100 in the United Kingdom, and the S&P 500 index in the United States.
Since its inception at the end of 1987, the DAX has mirrored other indices during major economic events throughout history, including the tech bubble in 2000, significant lows in 2003, as well as other fluctuations over in subsequent years. The index plunged in 2008 amid the global financial crisis and did again during the global Covid-19 outbreak.
The DAX 40 is the most common benchmark for German and European markets. These 40 companies are reviewed each fiscal quarter by an independent body that may add or remove companies to reflect changes in market cap.
Here are some of the most popular components of the DAX 40:
BASF SE (ETR: BAS) - one of the largest chemical producers in the world, with 390 production plants around the world.
Bayer AG (ETR: BAYN) - a pharmaceutical company that produces some of the most popular pain relief drugs.
Airbus SE (EPA: AIR) - an international pioneer in the aerospace sector designing manufacture and deliver industry-leading commercial aircraft.
BMW AG (ETR: BMW) - a well-known automaker that has manufactured various award-winning models.
Deutsche Bank AG (ETR: DBK) (NYSE: DB) - one of the largest banks in the world, operating in 58 countries in Europe, Asia and the Americas.
Siemens AG (ETR: SIE) (NYSE: SI) - an electronics manufacturer and electrical engineering services provider operating in a wide array of market industries.
Volkswagen AG (ETR: VOW) - the largest automobile manufacturer by worldwide sales in 2016 and 2017.
Adidas AG (ETR: ADS) - a popular design and clothing company headquartered in Herzogenaurach, Germany.
To be included in the DAX 40, a company must first be listed in the Prime Standard segment on the Frankfurt Stock Exchange. Companies that belong to this segment have to meet higher standards of transparency than companies listed on the General Standard segment.
Additionally, the company should be continuously traded in Xetra with a public float of at least 10%. Another requirement is to have an office registered in Germany with most of its volume of shares traded in Frankfurt, and be headquartered in one of the EU countries.