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One of the most important indices in Europe is to include more constituents but with tighter qualification rules
Thursday 26 Nov 2020 Author: Martin Gamble

Germany’s leading blue-chip index, the Dax 30, is going to see its first major overhaul since being created over 30 years ago.

The Dax 30 index represents the 30 largest German listed companies trading on the Frankfurt Stock Exchange. It is one of the most important indices for anyone looking at European stocks.

The need for change became apparent following the collapse of payments group Wirecard after allegations of accounting fraud. Last week the company’s creditors told a court that they are owed at least €12.5 billion.

Wirecard had a chequered history of filing its accounts on time so from March next year companies in the Dax index will need to produce timely audited annual reports and quarterly statements. Firms infringing these requirements will automatically face exclusion after a 30-day warning.

From September 2021 the index will be expanded to 40 names, increasing diversification, and reducing the weightings of all constituents, making the index less concentrated.

Lastly, the selection criteria for future inclusion in the index will be beefed up so that from next month qualifying companies must demonstrate two successive financial years of positive EBITDA (earnings before interest, tax, depreciation and amortisation).

The company that replaced Wirecard in the Dax was delivery company Delivery Hero, which hasn’t generated any profits over the last few years.

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