Germany's stock market will create a new stock index that does not limit the weight of individual stocks. This is because the share price of SAP, the largest software company by market capitalization, surged beyond the regulated limit.
According to major local foreign media on the 11th (local time), the Frankfurt Stock Exchange plans to create a new stock index, a variation of the representative index DAX, starting from the second quarter of this year. The DAX is an index composed of the top 40 companies by market capitalization.
The DAX limits the weight of individual stocks to a maximum of 15%. However, SAP's stock price rose sharply, increasing by 67% last year alone, causing a kind of market distortion. SAP's share of the market capitalization of DAX-listed companies exceeded 15% in September last year and reached 16.7% the day before.
The market also interprets this as a measure by the stock exchange to keep SAP attached to the German stock market. This is because stock price ETFs sell SAP shares every time the price rises to meet the limit, negatively affecting the stock's value.
In fact, Linde, a multinational industrial gas company that competed for the number one spot in market capitalization on the German stock market, withdrew from Germany in 2023 and was listed on the New York Stock Exchange in the United States.
Despite a real economy recession, the German stock market rose 18.8% last year. However, similar to the New York Stock Exchange, seven stocks including SAP, defense company Rheinmetall, and renewable energy technology company Siemens Energy accounted for 96% of the index's gains. SAP alone accounted for 40% of the index.
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