Capital Market and Shares

Stock Market

Following sharp price increases of in some cases more than 20% in 2009, the global stock markets, particularly the major indices such as the DAXDAXAcronym for “German stock index – calculated on the basis of the weighted prices of the 30 largest (by market capitalization and market turnover) German stock corporations. and the Dow Jones, made an extremely slow start in 2010, recording significant losses in the first two months of the year. This was due to continuing uncertainty regarding the general shape of the financial sector, and a restrained forecast of the overall economic situation. Boosted by positive economic signals, the month of March started with a short-lived rally on the equity markets. This was followed by a sideways trend in the second and third quarter, mainly caused by uncertainties on the international capital markets, particularly the downgrades by ratingRatingThe rating is a classification of the creditworthiness of a company accepted on the international capital market. It is published by independent rating agencies such as Standard & Poor’s, Moody’s or Fitch based on a company analysis. agencies for Greece, Ireland and Portugal. In addition, market participants were unsettled by the further development of the U.S. economy. Towards the end of the year, share prices rose, triggered by positive quarterly results and improved profit forecasts by many companies, as well as the surprising strength of the economic recovery in the EU. This brought the year on the stock markets to a positive close.

The world’s leading stock indices recorded heterogeneous growth rates in 2010: the American Dow Jones index closed 2010 at 11,578 points, 11% higher than at the beginning of the year. Following a 24% rise in 2009, the German stock index DAX, rose by 16% in the year under review – placing it among the indices that fared best in 2010. After starting the year at the 5,957 point mark, it initially fell to a year low of 5,434 points at the start of February but closed the year at 6,914 points.

The general trend in other European stock markets was also very positive; however they were not able to keep pace with the high level of growth of the Dow Jones and the DAX. The Asian markets reported predominantly restrained growth: The Singapore Straits Times and Hong Kong Hang Seng indices gained 2% and 3% respectively in 2010. The Japanese Nikkei index closed the year down 3%. Further information about the performance of these stock indices can be found in table 1.3.1.

Individual industries developed very differently in 2010. On the back of improving economic prospects, shares that are generally considered cyclical, such as those of companies in export-driven industries, recorded the strongest growth. In contrast, shares from the financial sector mainly showed weak performance, while shares from the healthcare sector recorded average growth in the environment outlined above.