Pioneer Briefing US Edition

The Decoupling of the DAX


Good Morning,

Major German corporations are decoupling, not from China and the Communist Party (CCP), but from Germany and Scholz. The German CEOs sought and found new production sites, markets and investors globally.

Olaf Scholz and Xi Jinping © dpa

This form of political decoupling showcases the geostrategic cleverness of large companies. They take advantage of what the stock market offers rather than waiting on politicians to get it right. It's an opportunity for growth even amidst economic stagnation.

Here are three strategies they are implementing:

#1 Using the World As Their Marketplace

The DAX has risen about eight percent since the beginning of the year alone. In addition, DAX dividends scheduled for 2023 are up 2.4 percent to €53.8 billion — a record high. This is remarkable, especially considering that the economy is still deciding whether to stagnate or shrink.

Eine Infografik mit dem Titel: The Development of the DAX

Performance of the DAX since the beginning of 2023, indexed in percent

The increasing share of sales generated abroad is crucial to their success. DAX companies now generate only 18 percent of their revenue in Germany. They benefit above all from the strong U.S. economy and emerging markets.

Eine Infografik mit dem Titel: The World as a Marketplace

Regions in which the DAX companies generate their sales, in percent

For example, Mercedes-Benz derives only 16.8 percent of its revenue from Germany, 23.5 percent from the U.S., nearly as much from Europe, and 16.5 percent from China, with the remainder coming from other emerging markets in Southeast Asia.

Christian Klein, CEO of SAP © dpa

SAP, the most valuable DAX company with a market value of about €200 billion, generates only 15.8 percent of its revenue in Germany. A third of its revenue comes from North America, another third from Europe and the rest from Asia and South America.

Telekom CEO Höttges, AGM'24 © imago

Deutsche Telekom, once a German state-owned company, is now primarily American. Only 23 percent of its revenue is generated between Husum and Munich, while 64.6 percent comes from the U.S.

Eine Infografik mit dem Titel: Success Through Foreign Sales

Share price performance of SAP, Telekom and Mercedes-Benz since the beginning of 2023, in percent

#2 Manufacturing Offshore

While DAX companies' headquarters remain in Germany, growth is occurring internationally. In 2023, only 29 percent of DAX companies' assets—factories, offices, machinery—were located in Germany.

Eine Infografik mit dem Titel: DAX: Relocation of Production Abroad

Invested assets of the major DAX companies in Germany, in percent

DAX company investments in Germany have been declining for years. And this trend will continue as a result of expansion into new markets.

Martin Brudermüller, CEO of BASF SE © dpa

Take BASF, for example: despite politician’s warnings about decoupling, the chemical giant is investing around ten billion euros in new plants in China. In an interview with the Frankfurter Allgemeine Zeitung (FAZ), BASF CEO Martin Brudermüller explains:

China is by far the largest chemicals market in the world, accounting for more than 50 percent of global production. Measured against this, we as BASF are underrepresented there, less than 15 percent of our sales are in China. Where will the money come from to pay for the transformation in Germany if not from China?

Ola Källenius, CEO of Mercedes-Benz Group AG © imago

Another example is Mercedes-Benz, which is expanding production in the U.S. and is attracted by substantial incentives from the Inflation Reduction Act. The Alabama SUV plant will produce electric SUVs starting in 2026, with possible expansion in Mexico.

Guillaume Faury, CEO of Airbus SE © imago

DAX-listed Airbus is expanding production in the U.S. and China, and they are negotiating with the Indian transportation group Tata, to manufacture civil helicopters in India. Airbus is also expanding satellite production lines in Spain.

#3 Putting DAX in the Hands of Foreign Investors

The business and shareholder structure are international. Two-thirds of DAX stocks are in foreign portfolios.

The share of U.S. investors in the DAX is rising steadily, from 17.3 percent in 2010 to 23.3 percent in 2022. BlackRock and Vanguard are the top two American investors, followed by Norway's Norges Bank.

Christian Lindner, German Minister of Finance © dpa

Despite the German finance minister describing the German economy's performance as "embarrassing," American investors remain optimistic. This optimism is spreading to Frankfurt, bolstering the performance of the German stock market.

Fed Chairman Jerome Powell © imago

U.S. investors are joyfully anticipating the Fed's interest rate cut. They also want to relativize the impact of their American investments by balancing the risks between the USA and Europe. As the DAX has benefited less from the stock market boom over the past ten years, many local stocks are considered undervalued.

Eine Infografik mit dem Titel: DAX: Foreign Investors Take the Lead

Share of foreign investors in the DAX companies, in percent

In conclusion, the optimistic atmosphere on the Frankfurt stock exchange and the promising DAX numbers cannot be attributed to Olaf Scholz and his Economics Minister Robert Habeck — despite any attempts they may make to take credit during the election campaign.

André Kostolany (1998) © dpa

As the renowned speculator André Kostolany once remarked:

The greatest speculation of all time would be to buy a politician at his intrinsic value and sell at his self-perceived value.

  • Chancellor Scholz in China: Xi Jinping remains firm regarding a solution to the Ukraine conflict.

  • Boehringer Ingelheim takes the top spot: The German family-owned company surpasses industry leader Bayer.

  • For the Dior Fall 2024 show, the chief designer of the luxury brand, Maria Grazia Chiuri, draws inspiration from the androgynous style of actress and fashion icon Marlene Dietrich.

World Briefing LIVE with Chelsea Spieker, Dr. Sebastian Sons, Natalie Amiri and Gerhard Conrad © Anne Hufnagl

On Monday, my colleague Chelsea Spieker spoke with Natalie Amiri, Gerhard Conrad and Dr. Sebastian Sons aboard the Pioneer One to discuss developments in the Middle East with approximately 100 guests.

The Experts: Natalie Amiri is a journalist, author and TV presenter who headed the ARD studio in Tehran (Iran) for five years. Gerhard Conrad is an Islamic scholar and former German Federal Intelligence Service agent. Dr. Sebastian Sons is an author and a senior researcher at the Center for Applied Research in Partnership with the Orient.

Natalie Amiri on the Pioneer One © Anne Hufnagl

Step by Step: Natalie Amiri sees Iran's direct attack on Israel as a turning point in the ongoing events in the Middle East. She said that if Israel responds with military force, Iran will do the same:

A red line has been crossed, and this red line was also a security factor in the region.

Click here to listen to today’s episode of the Pioneer Podcast.

Sebastian Sons, an expert on the Arab Gulf states, analyzes their relationship with Iran:

It's not that the Saudis suddenly think the Iranians are their best friends. It's a tactical approach.

Excerpts of this conversation in German can be heard in today’s episode of the Pioneer Podcast. The entire discussion will be available as a podcast on Saturday.

Olaf Scholz and Xi Jinping © dpa

Olaf Scholz, three of his ministers and a group of German CEOs were greeted with military honors in Beijing yesterday. Party and state leader Xi Jinping also met with the Chancellor.

Scholz and Xi's meeting lasted three hours and twenty minutes. After an initial meeting in a large group, they had a 45-minute private tea ceremony followed by a joint meal.

The Chinese president did not offer a solution to the war in Ukraine. According to the Chinese side, there was an "in-depth exchange of views" between Xi Jinping and Olaf Scholz. However, China is "not a participant in the Ukrainian crisis."

Vladimir Putin and Xi Jinping © imago

Xi Jinping reportedly made it clear in the conversation that he was not convinced by the planned Swiss peace conference in the Russian president's absence. His words:

All countries must have a seat at the table. None should be on the menu.

But it won't work without China. Scholz is also aware of the importance of Chinese participation in possible peace negotiations. On X, he writes: "China's word carries weight in Russia.”

Dividing the West: "China and Germany are the world's second and third largest economies," Xi Jinping says, praising the Germans for "maintaining a stable relationship with China" despite "several major changes in the global situation." He refers to the United States when he says that together, they should "guard against the rise of protectionism." Xi believes that Germany and China should "view and expand their relationship from a long-term and strategic perspective."

While business leaders continue to engage with China and navigate between de-risking and re-risking, Scholz made little significant progress on his primary concern regarding the war in Ukraine.

It is clear that China is the new central player in world politics.

Xi Jinping © imago

Unstoppable growth: China's gross domestic product (GDP) grew 5.3 percent in the first quarter from the year before, well above analysts' expectations of 4.6 percent. China's National Bureau of Statistics said:

The national economy got off to a good start in the first quarter, laying a solid foundation for the whole year.

However, it noted that "the foundation for economic stability is not yet solid" as "the external environment is becoming more complex, difficult and uncertain."

Forecast for 2024: Yesterday, the International Monetary Fund (IMF) predicted China's economic growth will be 4.6 percent in 2024, down from 5.2 percent in 2023. In 2025, growth is expected to slow slightly and drop to 4.1 percent.

Economics Minister Robert Habeck © dpa

Germany needs to catch up: Robert Habeck can only dream of such figures in the Federal Republic. According to the latest IMF figures, Germany is expected to achieve economic growth of only 0.2 percent in 2024. At the end of January, the IMF predicted growth of 0.5 percent for Germany. None of the other major G7 industrialized nations, such as France (plus 0.7 percent), the United States (plus 2.7 percent) or Italy (plus 0.7 percent), are expected to perform as poorly in 2024.

Hubertus von Baumbach, CEO of Boehringer Ingelheim © imago

New Number One: A quiet leadership change has occurred in the pharmaceutical industry. German family-owned Boehringer Ingelheim, based in the German state of Rhineland-Palatinate, has strengthened its position in the traditional pharmaceutical business, overtaking industry leader Bayer as the largest supplier of prescription drugs.

The company's core pharmaceutical business recorded sales of €19.7 billion, marking a 6.6 percent increase over the previous year. By contrast, Bayer's sales in the same division shrank by 6.1 percent to €18.1 billion.

The key driver for this growth is Boehringer's diabetes drug Jardiance. Currency-adjusted sales of the drug rose by more than 31 percent to nearly €7.4 billion.

Ingelheim is not relaxing after this initial victory. Last year, CEO Hubertus von Baumbach, the great-grandson of company founder Albert Boehringer, increased investment in research and development by 14 percent to €5.8 billion. Over the next five years, the company plans to invest an additional €36 billion.

Joaquin Duato, CEO of Johnson & Johnson © imago

Profit Surge: Pharmaceutical giant Johnson & Johnson (with a market cap of about $349 billion) reported a net income of about $5.4 billion in the year's first quarter. A year ago, the company reported a loss of $68 million, mainly due to legal costs.

Confident outlook: Following the first quarter, management expressed sufficient confidence to adjust its revenue forecast for 2024. Originally anticipating growth between 5.0 to 6.0 percent, they now anticipate growth between 5.5 to 6.0 percent, positioning themselves in the higher end of the previously mentioned range.

Shares fall: Despite the revision and the company's 62nd consecutive dividend increase, investors were not swayed. The stock experienced a 2.5 percent decline in value for the day, indicating apprehensions regarding the lackluster revenue performance.

Designer from Dior, Maria Grazia Chiuri, 2019 © dpa

A tribute to Marlene Dietrich: For the Dior Fall 2024 show, the luxury brand's chief designer, Maria Grazia Chiuri, draws inspiration from the androgynous style of German-American actress Marlene Dietrich as the central theme of her collection.

Marlene Dietrich, 1930s © imago

Dietrich was born in Berlin-Schöneberg in 1901 and went on to conquer the world of acting and singing. She remains a style icon to this day.

She once said:

I dress for the image. Not for myself, not for the public, not for fashion, not for men.

During her lifetime, Dietrich wore and admired the collections of the French Maison and was a close friend of Monsieur Christian Dior himself. Chiuri particularly honors the contrasts in Dietrich's style, from extreme femininity to the androgynous suits and ties for which she became infamous. This caused quite a stir in Hollywood and beyond.

Marlene Dietrich wears Christian Dior, 1950 © imago

Namesake: Almost as famous as Marlene Dietrich herself are the Marlene Pants, which are wide, straight-legged suit pants inspired by her iconic style. The pants have been featured in fashion magazines since 1932.

Marlene Dietrich, 1942, Courtesy Everett Collection © imago

Marlene Dietrich was a woman who saw through Hitler and rejected him ("Boys! Don't sacrifice yourselves! The war is shit, Hitler is an idiot!").

She also valued her independence, especially when it came to the world of men:

Almost every woman would like to be faithful. It's just difficult to find a man to whom you can be faithful.

Wishing you a wonderful start to your day. Stay informed. Stay with me.

Best wishes,

Pioneer Editor, Editor in Chief, The Pioneer
  1. , Pioneer Editor, Editor in Chief, The Pioneer

Editorial Team

Eleanor Cwik, Alexia Ramos Gonsen, Lukas Herrmann, Nico Giese & Paulina Metzler

With contributions from Philipp Heinrich, Daniel Bayer & Tatiana Laudien

Translation Team

Eleanor Cwik & Alexia Ramos Gonsen

Graphics Team

Julian Sander (Cover Art)


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