Porsche is soaring above the DAX index

The German stock market is experiencing a significant change as Porsche AG, the iconic sports car manufacturer, and Sartorius, a leading pharmaceutical and laboratory supplier, are leaving the DAX, Germany's premier stock index. This move comes as the Deutsche Börse reviews the composition of the DAX and other indices, such as the MDAX, on a quarterly basis.

Porsche AG's departure from the DAX marks a symbolic moment for the German automotive industry, which has been grappling with declining profits due to various factors, including the sluggish Chinese market, difficulties in selling electric cars, and the trade dispute with the USA. The company went public at the end of September 2022, celebrating one of the largest IPOs in German economic history, but has since suffered significant profit declines, leading to cost-cutting measures.

Porsche's share price has fallen from almost 120 euros after the IPO to around 45 euros recently. The problems of the German automotive industry are undeniably affecting Porsche, with the decline in demand after the corona pandemic, high inventory levels at customers, and a weak market in China contributing to the drop in its share value.

Meanwhile, Sartorius, based in Göttingen, is also leaving the DAX. The decline in demand after the corona pandemic, high inventory levels at customers, and a weak market in China have also contributed to the halving of Sartorius' share value over the past three years. Despite this, it's important to note that changes in the DAX have no long-term impact on share prices, but they are important for index funds (ETFs) that directly and one-to-one replicate the DAX.

The real estate platform operator Scout24 and the plant engineering company GEA will take Sartorius' and Porsche's places in the DAX. Membership in the DAX or MDAX brings prestige and greater visibility to international investors.

While Porsche and Sartorius are leaving the DAX, it's not a one-way street. Commerzbank, which left the DAX in 2018, returned in 2023 after the DAX was expanded from 30 to 40 components. Lufthansa, which had to leave the DAX for the MDAX in the summer of 2020, is frequently considered a candidate for a comeback.

Being listed in the top German stock market league has no concrete consequences for a company's business. However, it does provide a benchmark for investors to compare a company's performance against its peers. The Deutsche Börse's quarterly reviews ensure that the DAX and MDAX remain reflective of the German economy and the global market.

In conclusion, the departure of Porsche and Sartorius from the DAX signifies a shift in Germany's leading stock market index, but it does not necessarily reflect the long-term performance of these companies. The DAX and MDAX continue to evolve to reflect the changing landscape of the German and global economy.