German Stocks Surge as Low Valuations and US Exposure Drive Gains

Several reasons underpin these gains, including low expectations at the start of the year, the exposure to the United States economy and the upcoming snap election, analysts told CNBC.Sabrina Reeh, senior portfolio manager at DWS, told CNBC on Wednesday that valuations were relatively low at the start of the year and the sentiment was 'muted' across Germany equities, but that earnings developments ultimately came in 'better than expected', whose shares rose nearly 59% this year.

Maximilian Uleer, head of European equity and cross asset strategy at Deutsche Bank, told CNBC that the company has contributed 8% to the year-to-date performance of the German market. In late October, for instance, SAP shares hit an all-time high after the company raised its full-year targets and posted strong numbers for its cloud business. At the time, CEO Christian Klein said SAP was 'confidently' raising the outlook and added 'we are making strong progress on Business AI'. DAX companies generate a higher share of their revenue in the U.S. than in Germany. Despite concerns about potential tariffs, a significant portion of that revenue is produced local for local and likely not subject to tariffs,' Deutsche Bank's Uleer said. Though the collapse of the German government in November largely emerged as a surprise, analysts recognize the development could become a positive for equities. 'From a market perspective, snap elections are perceived as an opportunity for more structural reforms and higher spending, be it via a shift within governmental spending priorities or via a higher fiscal deficit,' Uleer also said. This is particularly relevant when manufacturing, traditionally a big component of the German economy, has been hit hard throughout 2024. The latest PMI data showed further contraction for the embattled sector in December. DWS' Reeh mentioned how the snap election helped with the overall sentiment toward the German marke

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