Germany offers good investment options despite crisis in eurozone
The German stock market is booming, despite the weakness of euro and the existing restrictions on the trade with Russia, which has always been one of Germany’s largest trade partners outside the EU.
On Monday, March 16th Germany’s DAX index reached its record highs this week, exceeded 12000 mark, which is by 20% higher the figures of the beginning of January of the current year.
One of the reasons of this is the recent launch of the government bond-buying program by the European Central Bank, valued at €60 billion ($63 billion) a month which aims to attract hundreds of billions in the ever declining economy of the EU.
In this regard, the majority of investors were forced to shift from overestimated EU bonds to large, well-established companies, which offer high, regular dividends.
An example of these companies are 30 largest German companies in terms of order book volume and market capitalization, measured by DAX, Germany’s leading stock market index.
The DAX list includes such industrial giants as Adidas, Allianz, BASF, Bayer and some others, an interest to which from investors for the last several weeks has significantly increased.
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It is expected that the German stocking market will continue to grow by at least the end of the current year, as it will continue to be more attractive for investors than bond yields, which significantly declined, due to the increase of prices.
With the ever growing volume of investments in the German stock market, the average amount of equity dividend yields that pay by local companies may decline from last year’s 4% to 3%-3,2%, which although will be comparable with the average EU figures and will still be significantly higher the US figures of less than 2%.
In addition to large companies from DAX, there is also the ever growing interest from investors into smaller emerging companies, which number in the German stock market in recent years has significantly increased. Despite the fact that such companies may offer higher yields, investments in their stocks may associate with high risks, due to the possibility of a sudden reduction of dividends.
Insurance and possibly pharmaceutical companies may be associated with significant potential profits for investors in the German stock market at present.
In the case of pharmaceutics, the launch of a new important drug may significantly increase the company’s capitalization and will be beneficial for its investors. Due to forthcoming expiration of their drug patents many German pharmaceutical companies have already started the development of new original drugs, many of which could be launched already by the end of the current year.
At the same time in the case of insurance sector, the majority of companies operating in this field has high capitalization, being able to pay higher dividends, which could reach 5%, or even higher.
Finally, the ongoing conflict with Russia still has had a negative effect on those German companies, which depend on the exports of Russian energy resources.
Eugene Gerden is an international free-lance writer, based in St. Petersburg, who specializes on writing in the field of mining, metals and rare earth metals. ... <Read more about Eugene Gerden>