It’s that time again: In a few days, the next round of musical chairs in the German stock indices is coming up! Last night, several changes were announced by the German Stock Exchange in the German index family (consisting of DAX, MDAX, SDAX, and TecDAX), which will come into effect on March 18th.

DAX and Co. are reviewed each quarter, in March, June, September, and December. The latest index review has resulted in the following – partly very surprising – changes:

Upcoming changes at a glance There will be no changes in the DAX this time. However, there will be two new additions and two existing values will have to make room in the MDAX, SDAX, and TecDAX. The biotech specialist Morphosys and the industrial conglomerate Bilfinger will join the MDAX. However, for Morphosys, it could be a short-lived stay due to an ongoing acquisition by the Swiss pharmaceutical giant Novartis.

The MDAX will see the departure of the commercial kitchen equipment supplier Rational and the auto supplier Vitesco. Rational will not be leaving the MDAX due to a decreased market value or a reduced free float (percentage of freely tradable shares), but rather surprisingly, because the company did not meet one criterion in the German Corporate Governance Code.

Specifically, it concerns the term of office of the chairman of the audit committee of the supervisory board. However, the company Rational announced today that it will soon fulfill this criterion (after the annual general meeting in May) and then re-enter the MDAX.

A similar problem occurred a few months ago with the plant builder Krones. The Krones stock also had to temporarily leave the MDAX and later regained its place in the index when all criteria were met again.

The new additions to the SDAX in mid-March will be the MDAX-exit Vitesco and the financial services provider MLP. As a result, the two MDAX newcomers Morphosys and Bilfinger will be leaving the SDAX. The new additions to the TecDAX will be the semiconductor supplier Süss Microtec and the radiation and medical technology specialist Eckert & Ziegler. As a result, Verbio and Adtran Holdings will have to make room. Verbio is a specialist in biofuels and chemical products, and Adtran Holdings operates in the telecommunications industry.

How the changes can affect the indices In general, an index promotion can also be associated with a rise in share prices. This is mainly due to index funds (ETFs) having to include the stocks of the promoted companies in their portfolios. Stocks of demoted companies can sometimes experience negative developments as a result.

However, it cannot be said that promoted companies always perform positively afterwards, or that demoted companies always experience long-term negative developments. Therefore, you should not automatically buy the promoted companies and sell the demoted ones. Always check the fundamental data of the companies before buying or selling!