Your Weekly German Stock Review (11/24/2014 – 11/28/2014)

In this weekly feature, we’ll give a brief snapshot of the big stories and big stock moves that shaped the markets.

Figures in this article reflect prices as of market close on 11/28/2014.

The Major Indices

The DAX (the 30 largest companies on the Deutsche Börse) was flirting with 10,000 throughout the week, but as of Friday’s close at 9,980.85 had yet to surpass that magic number. The closest it came was Friday’s open at 9,990.70. Considering that two weeks ago, we were wondering if it would ever hit 9,500, a very good situation indeed. The MDAX (the next 50 largest German companies, excluding tech), TecDAX (the 30 largest tech stocks), HDAX (all stocks on the DAX, MDAX, and TecDAX), and EuroSTOXX 50 (50 blue-chip Eurozone stocks) all climbed as well, to 16,984.26, 1,347.02, 5,184.25, and 3,250.93, respectively, although the most significant gains in all four occurred in the first 90 minutes of trading Monday morning.

What is a “Frauenquote,” Anyway?

The economic news was good this week, with the Destatis statistics agency reporting that German GDP grew by 0.1% in the third quarter, confirming preliminary numbers released earlier this month. Also, German unemployment fell to a 23-year low of 6.6%. Unsurprisingly, the markets continued their climb (see above).

But the bigger news this week wasn’t about companies’ stocks, but their boards. On Tuesday night, Chancellor Angela Merkel’s coalition announced it would go ahead with a plan to require public companies to allocate 30% of their supervisory board positions to women. This arrangement, dubbed the “Frauenquote,” is based on similar legislation in Norway and Sweden. It will go into effect in 2016.

Will the Frauenquote have the hoped-for effects, namely “a cultural change in Germany and [modernization of] corporate culture,” as expressed by Manuela Schwesig, who drafted the legislation? It’s hard to say. Detractors point out that Norway’s version of the Frauenquote has not resulted in more women executives. None of Norway’s top 25 companies has a woman CEO, and only one has a woman CFO. Ironically, those numbers are identical to Germany’s: no DAX company has a woman CEO, and only Deutsche Lufthansa AG (ETR: LHA) (FRA: LHA) has a woman CFO. I am hopeful, however, that the legislation will eventually move this baseline, even if it will be several years before any effects are seen.

This Week’s Winners and Losers

WINNER: In the “No News is Good News” department, RIB Software (ETR: RSTA) (FRA: RSTA) jumped an astonishing 15.1% on Monday, for no apparent reason whatsoever. A few deals had been announced in the past few weeks, but nothing particularly earth-shattering. Perhaps investors just woke up to the fact that the shares had actually declined by nearly 15% since the company raised its earnings outlook on October 31 and hopped on to the buying opportunity.

LOSER: But no news isn’t always good news! Suedzucker AG (ETR: SZU) (FRA: SZU) dropped 3.68% on Wednesday, the worst one-day performance of the week among HDAX companies. Like RIB Software, discussed above, the change came on no news whatsoever. The stock of Europe’s largest sugar producer is still up slightly from the low it hit in mid-October, but is nowhere near the all-time highs it hit in 2013, when its price was almost three times what it is today.

WINNER, THEN LOSER: KUKA AG (ETR: KU2) (FRA: KU2) hit a record high on Monday (up 5.42%) after it reported strong growth in orders in the first nine months of 2014. But then the stock of the engineer and manufacturer of robots and industrial systems dropped more than 3% on both Tuesday and Wednesday, after London-based hedge fund CQS increased its short position in the firm. Analysts are split on the company, too. Just last Thursday, for example, US-based Citigroup rated the stock a “Buy” with a price target of 61, while German bank NordLB rated it a “Sell” with a target of 41.

WINNER: Lufthansa,  which rose 4.95% on Friday, the best one-day gain of any DAX stock this week (narrowly edging out specialty chemical producer LANXESS AG (ETR: LXS) (FRA: LXS), which rose 3.29% on Wednesday). It was a good week for most DAX stocks, with several one-day gains of 2% or more.

Have a great weekend!