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What's in Stock in 2015

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  • Why it matters

    Why it matters

    Most analysts were optimistic, expecting the DAX to climb to 10,706 points by the end of next year.

  • Facts

    Facts

    • Barclays had the most optmistic forecast for Germany, predicting that the DAX will hit 11,800 by the end of 2015.
    • The pharmaceutical company Bayer is the most valuable DAX company, with market capitalization of more than €95 billion.
    • Analysts predict that Deutsche Bank stock will increase  by 22.4 percent next year.
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For the German stock market, it is the best of all possible worlds.

The dollar has gained strength in recent months and is boosting the country’s export economy.

European Central Bank President Mario Draghi is keeping interest rates at an historic low in the euro zone, and has reserved as much as €1 trillion for buying government bonds.

And the price of oil is at a five-year low, at about $60 a barrel.

Jens Weidmann, president of the German central bank, the Bundesbank, said the low oil price amounts to a free-of-charge “mini growth-boosting program.”

But all this appears not to have impacted the markets much. Germany’s DAX, the blue-chip index of the 30 largest companies, did cross the 10,000-point threshold several times and reached an all-time high of 10,093, but overall it rose less than 4 percent for 2014.

Next year should be better, but the 35 experts Handelsblatt surveyed for its annual analysis of capital markets still don’t believe there will be a strong surge. On average, the experts from international banks believe the DAX will rise 8.2 percent in 2015, to 10,706. If that holds true, the index will have risen by almost half its value within four years.

With its forecast of 11,500 points, Deutsche Bank is among 11 institutions that predict the DAX will reach at least 11,000 next year. Deutsche Bank and BHF-Bank are the only German banks to be so optimistic. Most of the higher forecasts come from foreign institutions.

The British bank Barclays is most optimistic, with a prediction that the index will hit 11,800 by the end of 2015.

In view of low interest rates and loose monetary policies in the 18-nation euro zone, Barclays also predicts the euro will continue its slide against the dollar.

“This will increase the competitiveness of the German economy and have a positive impact on company profits, which will send the German stock market even higher,” said Alexander Doll, co-head of Barclays in Germany.

Ulrich Stephan, chief investment strategist for Deutsche Bank, expects the German stock market to be one of the top performers worldwide in 2015.

“For the 30 companies in the leading German index, we are reckoning with an overall increase in profits of 9 percent, after only 2 percent in the current year,” he said.

In comparison to stocks of other European countries, German companies perform better in terms of price-to-earnings ratio.

The pharmaceutical company Bayer became the most valuable firm on the DAX this year, with market capitalization of more than €95 billion, or about $116 billion.

Bayer’s share price has steadily risen since 2011 under the leadership of chief executive officer Marijn Dekkers. The chemist with a doctoral degree came to Bayer five years ago from the Netherlands. He overhauled the company and is seeking to make it a world market leader in non-prescription drugs. In addition, Mr. Dekkers plans to split off the plastics division Bayer MaterialScience, which is valued at €10 billion ($12.2 billion), according to analysts at Equinet.

On average, the experts from international banks believe the DAX will rise 8.2 percent in 2015, to 10,706. If that holds true, the index will have risen by almost half its value within four years.

The favorites for the coming year, however, are German firms that underperformed the overall stock market in the last 12 months. The experts are confident they will rebound.

Take Deutsche Bank, Germany’s largest financial institution. Over44 percent of analysts now have a buy recommendation on the stock, according to Bloomberg, despite the fact that the company appears plagued by a never-ending series of legal problems and the head of its supervisory board, Paul Achleitner, has said the firm should reexamine its strategy.

Omar Fall from Bankhaus Jefferies cut his profit forecasts for Deutsche Bank because of higher restructuring costs, but still recommends buying the stock because of its low price. Most analysts believe Deutsche Bank stock will increase in value most on the DAX in 2015 – by a predicted 22.4 percent.

But there are pessimists too. Among those sounding alarm bells are Landesbank Hessen-Thüringen, Fürst Fugger Bank and DZ Bank. The analysts at DZ Bank see the DAX ending 2015 at 9,500 because of “burdensome conditions in Europe,” including negative effects from Germany’s new minimum wage introduced this year.

But if things turn out as they did this year, then on average, the analysts will be correct. For 2014, they expected to close the year at 10,100, not far off its actual current value.

 

Robert Landgraf is deputy head of finance coverage at Handelsblatt. To contact him: landgraf@handlsblatt.com

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