Market Overview: German Stock Market (2011, wk.15)

8/7/2019 Market Overview: German Stock Market (2011, wk.15)

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Market Overview: Frankfurt Stock Exchange (DAX) 2011, wk. 15

Highlights:

The Deutsche Borse DAX index decreased by 0.53%

Merck KGaA (MRK) was the most successful performer

The worst performer was Commerzbank AG (CBK.DE) with a decline of16.57%

The week 15 has been quite stagnant for the DAX index, resulting in a closing value of 7,181 at the end ofthe week, which is a decrease of 0.53% comparing to the weeks opening value. The index faced aremarkable decline on Tuesday, however, due to positive tendencies on Wednesday and Friday, the overallweekly change is smaller than in other stock market indices, as shown in the graph below.

Figure 1 Changes in the DAX index from April 11 till April 15. Compared to changes in the

New York Stock Exchange (NYSE), International and Commodities ETF (MSCI), and the Tokyo

Stock Exchange (Topix Core 30)

The new economic growth expectations that have been announced put Germany on a much fastergrowth path than its European neighbours. Stronger growth has also helped Germany reduce its

public deficit, as other Euro zone countries struggle with deficits and a debt crisis. On Friday ameeting was held between Chancellor Angela Merkel and the countrys states leaders in order tocreate a planon how to switch nuclear energy with renewable energy as soon as possible, as worriesover atomic power have increased due to Japan's nuclear disaster.

The winners of this week are Merck KGaA (MRK) and Adidas AG (ADS) with a gain of5.94% and2.83% respectively, it turned out to be most unfortunate forCommerzbank AG (CBK.DE) with a declineof16.57% and Wacker Chemie AG (WCH.DE) with a decline of6.12%.

The stock which yielded the highest returns at the Frankfurt Stock Exchange this week was MerckKGaA (MRK). Merck KGaA is a global pharmaceutical and chemicals company, which researchesdrugs in the areas oncology and neurodegenerative as well as autoimmune and inflammatorydiseases. The shares gained significantly on Tuesday and Friday when the price increased 2.2% ant

2.36% respectively and the company was one of the few that benefited from Japans nucleardisaster. Additionally, tests showed that the drugs developed by other pharmaceutical companies

1Market Overview is not an advice. Neither authors nor iFund or other representatives are liable for possible use of information contained iit. Relatively reliable public information (Exchanges websites, Bloomberg, Reuters, etc) was used to produce this Market Overview.
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were ineffective. The stock closed at 67.21, up 3.77 or 5.94% from its Mondays opening price of63.44 per share.

Figure 2 Performance of Merck KGaA (week 15)

The second top-performing stock this week was Adidas AG (ADS), the worlds second- largestsporting-goods maker. The shares opened at 45.58 on Monday and were trading at around 45.50till the end of the week, experiencing a sharp drop on Monday, as did many European stocks afterJapan raised the severity level of its nuclear crisis, and continuing to climb slowly till Friday. Theshares rallied on Friday as the company launched its new basketball shoe in an attempt to catch upwith Nike, the market leader. The stock price was up 2.8% on the final day of trading and the sharesclosed at 46.87, a 2.83% weekly gain. Rival Nikes shares dropped 2% on Friday. Last month,

Adidas claimed that earnings per share will grow 10% to 15% this year and the company expectsitsrevenue to increase at a mid-to-high single-digit percentage pace from last years record 11.9

billion euros. Adidas forecasts a 50% sales increase by 2015 as it plans to grow in the American,Chinese and Russian markets; therefore, the stock may be an attractive choice of a long-terminvestment in a portfolio.

Figure 3 Performance of Adidas AG (week 15)

The leading loser of the week 15 was Commerzbank AG (CBK.DE). It lost 16.57% of its shareprice. The price plummeted under 5 EUR per share i.e. to 4.35 EUR that is 52-week lowest price.

Opening price was 5.30 EUR; however, on Friday it ended up with only 4.43 EUR per share.



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Figure 4 Performance of Commerzbank AG shares (red) and DAX Index (green)

(week 15)

Commerzbank AG is second largest bank in Germany. It provides such services as accountadministration, payment transactions, security services, and investment banking. Although the bank

puts an emphasis on operations in Europe, it has foreign branches and representatives in 46countries. With about 60 thousand employees in previous year, the bank managed to operate with1.43 billion profits.

What could make such a company to lose one sixth of its value during one week? This might bestrongly connected with Commerzbanks announcement about its capital raising plans in previousweek. On 5th April Commercbank announced its desire to reduce dependence on state by repayinghybrid capital borrowed from the government. The bank has planned to raise its equity and do right

issue. The conditions of the right issue were 4.25 EUR per share, which was 0.25 EUR less thanpreviously. This obviously made the price of shares go down.

Figure 5 Performance of Wacker Chemie AG shares (red) and DAX Index (green)

(week 15)

The place of the second worst performer is taken by Wacker Chemie AG (WCH.DE). Afterreaching its 52-week high in price, this week was rather a step back for price growth. The opening

price on Monday was 168.70 EUR, but during the week it dropped by more than 10 EUR, landingat 158.37 on Friday. This translates in a decrease of 6.12% during week 15.

This company, which is based in Germany and operates in chemical business, could be split into 5large divisions. All these subsidiaries work with mainly two raw materials: silicon and ethylene. It

produces wafers for semi-conductor industry. Other divisions serve industries such as construction,



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automobile, textiles, and paints. The company employs about 16,000 employees and is representedin Europe, Asia and Americas. In 2010 Wacker Chemie operated with 4.7 billion revenues and 490

million profits.

This week showed continuation for the price decrease for Wacker Chemie. After the 1st of April,when Chinese chemical company Bluestar received an approval for acquiring Norwegian siliconcompany Elkem, price per share of Wacker has been going down; however, this linkage could beless direct that the situation in Japan. Although it might appear to have negative correlation to thedemand for production of Wacker, on the contrary it has increases because of rivals being hit inearthquakes in Japan.

This week was experiencing a negative tendency, as the ECB increased the interest rate to 1.25%.

However, this didnt have a huge influence on the positive mood, so we can say with a certain

degree of certainty, that the willingness to buy today is relatively high. One of the reasons may be,

the policy of ECB was met with understanding, that it is required to maintain growth and exit the

crisis.

Prices on the energy resources are declining, but in the long-term perspective we should see

increase due to the worlds lost of trust towards nuclear power. Saudi Arabia also is planning to

decrease the supply of oil in April.

In conclusion, in the following week the growth should continue. Of interest may be raw materials.

Still, the results of the Consumer Confidence Index on 18th April might provide extra information

regarding the future trends.

Review by: Liene Apsalone, Krlis Malcenieks, Dmitrijs Sureans, Justinas ukys.


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Market Overview: German Stock Market (2011, wk.15)