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German Stock Index DAX Turns 20

Twenty years after its debut, Germany's leading shares index, the Dax, has developed into a strong brand -- its image transformed from a symbol for the ups and downs of the stock market into a sign of growing prosperity.

Man pointing at line graph showing Dax progress

Many look to the DAX display as a sign of Germany's economic health

Germans aren't exactly known as a stockholding people. Yet many of them are fascinated by the curves and turns the Dax has taken since its official inception as Germany's index of leading shares 20 years ago. Though still young by comparison, the most important barometer of the stock exchange has had a turbulent youth.

On July 1, 1988, when the Dax was first calculated, it was set at 1,163 points. By the end of the fiscal year, the number had arbitrarily decreased to 1,000 points. Since those days, it has moved to over 8,000 points.

For Robert Halver of the Baader Bank, the Dax is a success story.

"We're talking about something emotional and when emotions get involved, people need something to hold onto.," he said. "The Dax Index is a gauge by which we can read how business is going, where the stocks are at. And that's a very important role."

Changing the way business is done

Digital reading of stock market says low of 6762.77

The Dax reached 8000 points since hitting a Jan 2008 low

There had never been such a precept before or, rather, no single guide. The FAZ-index or Commerzbank Index could give a daily overview of the market. But the Dax was calculated nearly every second.

"Because of that, business has grown more hectic -- things move faster and, most notably, there's been an increase in volume," said Fidel Helmer of the Bank Hauck and Aufhaeuser.

The Dax represents the development of Germany's 30 biggest capitalized companies on the stock exchange. To maintain stability, each enterprise is weighted differently and bears its own weight based on share conversion and the stock value of the index.

Over the years, there have been 24 changes to the index, the first being the replacement of the metal company Feldmuehle Nobel. Continental Tires is the only enterprise to have returned after a departure.

Most of the departed enterprises have left the exchange after consolidations: Thyssen and Krupp merged, Veba and Viag are now a part of Eon and the new government-run HypoVereinsbank has made room for Adidas.

There's also been just one break from the norm: after Bayer spun-off the chemical company Lanxess on January 31, 2005, the Dax contained 31values for one day only.

If you want a piece of Germany, buy the Dax

Of course, the index of leading shares is more than a barometer of the stock market. An entire industry has been established as funds and certificates try to emulate the Dax, a turn that's proven interesting to some.

Man speaking on television

Along with the FTSE and the CAC, the Dax represents Europe

"With this index, you can buy or sell all 30 Blue Chips with just one move," Helmer said. "You can see minute-by-minutes changes -- changes that are especially important for both institutional and private investors. And this is a direct reflection of German business today."

At least in the world of the stock exchange.

Many Wall Street watchers see Dax at eye-level with the Dow Jones index. And just as the Dow represents the US in the market, the Dax, the British FTSE and the French CAC 40 symbolize Europe.

"The Dax is better known in the US than in many large German cities," says stock analyst Robert Halver. "Whoever wants to buy a piece of Germany buys the Dax. Whoever wants to imitate Germany, buys the Dax."

Perhaps that's the reason why the 30 companies listed on the Dax were, for the first time, owned mainly by foreigners at the end of 2007.

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