German stocks are falling at a rate not seen since Europe’s sovereign debt crisis. The nation’s equity market has lost almost US$400 billion in value from a high in April as the DAX heads for its first back-to-back quarterly declines since the start of 2009.
Hit first by a rebounding euro and the Greek crisis, the losses accelerated in recent weeks as concern over a Chinese slowdown escalated and automakers tumbled after Volkswagen AG admitted cheating on emissions tests in some of its diesel cars.
“To some extent, investors have started to price in recessionary fears,” Ralf Zimmermann, a strategist at Bankhaus Lampe KG in Dusseldorf. “If markets don’t think central banks can react anymore, this would be very negative. However, I still think that markets will be mid-term up and not down as investors overreacted.”
The optimism that lifted the DAX 22 percent in the first quarter as the European Central Bank (ECB) began its quantitative-easing program has waned, with the gauge now down for the year.
While economists have cut their growth estimates for Germany this year to 1.6 percent from 1.8 percent last month, ECP President Mario Draghi last week said that it is too soon to say whether risks to the economic outlook warrant a step-up in stimulus.
German equities lost 23 percent since an April record through Monday, the fastest decline in a similar period since December 2011. Just this quarter, the DAX has tumbled 14 percent, more than any other major western-European market.
Germany’s link to China — it is the Asian nation’s biggest European trade partner — and VW’s downfall weighed on the market as utilities RWE AG and EON SE suffered from the lowest wholesale electricity prices in more than a decade and concerns their provisions for decommissioning nuclear plants may be insufficient.
Steelmaker ThyssenKrupp AG tumbled amid a rout in commodities, while Commerzbank AG was battered by share sales to repay state aid.
VW’s scandal will have repercussions for the DAX, Zimmermann said. The automaker accounts for almost 14 percent of the index’s estimated earnings for this year, Zimmermann wrote in a note on Tuesday last week.
The DAX has fallen so much that it now trades at 11.5 times estimated profit of its members, near the lowest valuation ever relative to the Stoxx Europe 600 Index, according to data going back to 2005.
To some investors, that represents an opportunity to buy German stocks.
“When the market is down with fears, we are on the buy side,” said Herbert Perus, head of equities at Raiffeisen Capital Management in Vienna. “We own some German companies and we’re very happy about our positions.”
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