The 30 companies in Germany’s Dax stock index make 70% of their sales abroad. So the Dax is a geared play on Germany’s exports and global growth. It is also increasingly a geared play on China, which accounts for only 6% of Germany’s exports but has a large impact on the Dax. Around 15%-20% of Dax earnings are China-related, says Ralph Atkins in the Financial Times.
Now German exports are struggling. The three-month average annual growth rate for German foreign sales has fallen to just 0.1%, a three-year low. Meanwhile, exports to China actually fell at an annualised rate of 2.5% in April.
A focus on luxury cars and investment goods means that German firms are especially exposed to the decline of China’s investment-led boom, says Atkins. BMW gets 17% of sales from China, according to FT Deutschland. So it’s no surprise German stocks have fallen further than the average European market in the past month. The headwind from China could persist for some time.