SDAX Index

Budding superstars

A bull figure is pictured in front of the German share price index DAX board at the German stock exchange in Frankfurt
Size does matter, just not the way we expect. Source: Reuters

Small is beautiful, at least when it comes to stock market logic in Germany. While a long-running rally of the blue-chip DAX has stalled and the medium-cap MDAX is merely ticking over, demand for their dynamic, small-cap cousins in the 50-stock SDAX index is going through the roof. On Monday, the SDAX hit an all-time high of 11,416.48 and is hovering not far below that peak.

Decoding the SDAX surge is simple. Germany’s economy is booming, thanks not just the performance of its export-hungry companies – the country’s traditional locomotive of growth – but also to domestic demand. This is a blessing for the broad-based SDAX, which is made up of the 81st to 130th-largest listed firms in Germany. “Due to its sector mix, the SDAX is benefiting from the boom even more than its big brother, the MDAX,” says Björn Glück, portfolio manager Small & Mid Caps at mutual fund Lupus Alpha.

Stand-out performers include heavy industrial stocks such as Hapag-Lloyd, SGL Carbon, Vossloh, Hamburger Hafen und Logistik, and Heidelberger Druckmaschinen. Weighted at 37 percent in the SDAX, industrial stocks tend to fluctuate with the economic cycle. The global economic recovery, and of the euro zone and Germany in particular, have given these companies a special boost, said Ulrich Stephan, chief investment officer for private and business clients at Deutsche Bank.

“In the SDAX, there are a lot of high-growth ‘pearls’ neglected during weak stock market years on account of their low liquidity.”

Björn Glück, portfolio manager, Lupus Alpha

In the DAX index of 30 top stocks, where industrials account for just 13 percent of weighting, the strengthening euro is putting a strain on export-oriented companies such as carmakers, whose suffering is deepened by the Dieselgate scandal and allegations of cartel-building. So it’s hardly surprising the SDAX is outpacing the DAX, having climbed 18 percent since the start of 2017. The DAX, meanwhile, has risen a mere 6 percent in the same period.

“In the SDAX, there are a lot of high-growth ‘pearls’ neglected during weak stock market years on account of their low liquidity,” said Mr. Glück, the Lupus Alpha manager. In times of economic recovery, these pearls quickly outshine the overall market, which is exactly what has happened in recent months.

Small caps, especially industrials and finance stocks, remain attractive despite their recent price spike. Since early 2017, these SDAX-listed titles have increased in value by 23.5 percent and 46 percent respectively. With a roughly 68 percent increase, Hypoport, a financial services provider, has been the top performer, followed by biotech concern Biotest at 67 percent.

This vigorous performance suggests the SDAX rally has further to run. Since the year 2000 German small caps, despite their volatile reputation, have outperformed the DAX blue chips in 13 of 17 years. Small, it seems, is the next big thing.


Jessica Schwarzer heads the Handelsblatt finance department. Jeremy Gray is an editor for Handelsblatt Global. To contact the authors:,

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