Dusseldorf The year-end rally is announced on the German stock market. For the third day in a row, the Dax started trading well above the previous day’s high and increased profits. The leading German index was trading at 15,728 points in the afternoon, an increase of 0.9 percent. This means that the Frankfurt benchmark has gained more than 600 points within three days. If the stock market barometer even comes close to maintaining this pace between the holidays, the mark of 16,000 points should be reached this year.
Martin Utschneider, technical analyst at the private bank Donner & Reuschel, is also optimistic that the Dax “will soon reach the previous record high of 16,290 points” – but this does not necessarily have to happen this year.
From a technical point of view, the foundation stone for this was laid yesterday, Wednesday. The Dax was able to overcome the 200-day line, which is mainly observed by long-term investors. The line is currently trading at 15,504 meters.
For a new record high, only the seasonal pattern on the stock markets needs to persist in early 2022. At the beginning of January of each trading year, new money often flows into the market, which then makes prices rise. By then at the latest, investors should look forward to a new record high.
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The current data from the Frankfurt Stock Exchange, which surveys medium-term oriented private investors and investment professionals, also signal a further rise in prices. Because despite the many negative news such as the impending interest rate turnaround in the USA and the Omikron virus variant, according to behavioral economist Joachim Goldberg, “the demand for shares – even if only sometimes out of embarrassment – seems to be unbroken”. And there is obviously still enough money. On the one hand, in the form of a high cash quota among international fund managers. On the other hand, given the high savings rate of US households, the question arises: Where should all this money go?
Yesterday’s trading day was an example of how a high cash ratio of international fund managers can affect the German market. After a long period of quiet trading, the gains of almost 150 points, a total of plus one percent, only came about in late afternoon trading. The significantly higher turnover shortly after the opening of the US stock exchanges, coupled with an increase in the euro against the dollar, suggest that international investment professionals may have bought German stocks.
According to the Frankfurt Stock Exchange survey, the overall mood of investors is neutral – but this is a positive sign that prices will continue to rise. The mood is usually positive in the last month of the year, as many investors are hoping for a year-end rally and are accordingly highly invested. According to the sentiment analysis, this is more of a burden because there is less money for further purchases.
Compared to the end of 2020, when the mood of domestic investors was much more positive, stock marketers are more cautious this year. That could create a potential surprise on the upside. Interestingly, last year’s scenario is almost identical to that of 2021 – only the price level is different.
In both years there was a slide in prices on the Monday after the big expiry day. At that time on 13,060 counters, on the Monday of this week after the expiry date last Friday to 15,060 digits. Last year, the index rose by around six percent to 13,907 points between the holidays. Converted to this year, this should enable courses of around 16,000 meters. However, the prerequisites for further price increases this year are better due to the neutral mood.
Online retailers are focusing on shortsellers
In view of the new Omikron virus variant and the associated new restrictions, a queasy feeling of déjà vus is spreading, as if not much has changed since the beginning of the pandemic in early 2020.
But the opposite is the case on the stock exchange. Many of the so-called corona winner shares no longer benefit from the restrictions, they even give way significantly. This is especially true for the shares of online retailers, which had risen significantly at the beginning of the pandemic.
The share of the online fashion retailer Zalando, for example, is the weakest value in the Dax 40 calculated at the beginning of the year. The paper of the food delivery service Delivery Hero has also fallen significantly since the beginning of the year.
And should the hedge funds prove to be right, the prices of some listed online retailers are likely to decline further. This is especially true for the smaller stocks such as the furniture mail order company Home 24 and the shop pharmacy. For these two stocks, the shortsellers are betting heavily on falling prices.
At Home24, according to data from the Federal Gazette, the so-called short sale rate is 9.5 percent, the highest of all Dax shares. In the past few days, hedge funds have increased their positions.
Short sellers borrow stocks to sell them instantly. They are betting that they will be able to stock up on the papers more cheaply by the return date. They reap the difference as a profit. This practice is called “short selling” in stock market jargon.
The Home24 share has already slipped by around 40 percent since its annual high at the beginning of February at EUR 26.86, and in the past four weeks alone there has been a decline of 16 percent. In the shop pharmacy, too, the short sale rate is comparatively high at 6.1 percent. The stock has lost more than a quarter of its value since late November.
Buying back these Home24 shares in a somewhat market-friendly manner should not be an easy undertaking. This is shown by a simple calculation example. The daily trading volume of Home 24 is between 170,000 and 190,000 pieces. But the hedge funds have to buy back around 2.8 million papers in order to give them back to the lender.
Such a mismatch can quickly lead to a squeeze out, a sharp rise in price without any fundamental news. Especially when many hedge funds want to end their speculation at the same time and start buying back the shares. Today’s news that Home24 is taking over the home decoration chain Butlers should not have appealed to the shortsellers. Because the share increases by 6.5 percent.
By the way, the best example of a short squeeze is the stock of the battery manufacturer Varta. At the end of January, the share price rose 39 percent within five trading days, accompanied by an extremely high trading volume. Back then, all hedge funds wanted out quickly because they feared attacks from so-called Reddit traders. When the hedge funds have bought their shares, the price then slips again. That is also part of a scenario.
Turkey’s bankruptcy risk rises to a record high
President Recep Tayyip Erdogan’s measures seem to work at first glance. The decline in the Turkish currency has slowed: at 11.0460 lira, the dollar fell to its lowest level in over a month. A few days ago this value was 18.3624 lira. To protect savers, the state should in future settle the difference between lira investments and comparable dollar investments from the treasury.
But for the “Wall Street Journal” this plan to save the lira is a “risky bluff”. Turkey’s plan to supply the lira with money again is a wise appeal to small savers, who are now deciding on currency fluctuations. “If it does not work, however, the entire banking system in the country could be at risk,” writes the US medium. Ultimately, it will be difficult to maintain confidence in the lira when inflation is at 20 percent and the devaluation that has already occurred will undermine purchasing power in the coming months.
The professional investors see it similarly. The amount of credit default insurance to protect against such bankruptcy has risen to a new record high. This CDS value (Credit Default Swaps) is currently 623. For a five-year government bond, professional investors have to pay 6.2 percent of the bond per year in order to protect themselves against default.
On Tuesday the CDS value was still at 522, on September 9th at 357. An unusually rapid increase that signals a significantly higher risk. Investors should keep an eye on this value. For comparison: For the Federal Republic of Germany this value is nine, which is equivalent to 0.09 percent annually.
Look at further individual values
United Internet: With sales, investors react to the majority takeover of the company by company founder Ralph Dommermuth. The Internet provider’s shares fall 0.9 percent to 34.66 euros. With this deal, the voluntary takeover offer announced in November for 35 euros each is off the table for the time being, says a stockbroker.
Continental: Encouraging statements on the course of business encourage investors to get started. The auto parts supplier’s shares rise 2.5 percent. The prospect of quarterly results at the upper end of the company’s targets was a positive surprise as market expectations were closer to the lower end of that range.
Here you go to the page with the Dax course, here you can find the current tops & flops in the Dax.