The covid-19 crisis exposes the frailties of Germany’s biggest firms

THE DAX INDEX of Germany’s 30 most valuable listed companies holds up a mirror to the world’s fourth-biggest economy. The reflection isn’t pretty. In mid-March the average “price-to-book” ratio of DAX firms’ market capitalisation to the book value of their assets fell below one, which has previously only happened in 2009 and 2011, amid the global financial crisis and the euro crisis, respectively. It is now hovering barely above one.

The pandemic has hit all of the world’s big stockmarkets. But it is shining a particularly brutal light on the weaknesses of Germany’s flagship index, which has underperformed those in other advanced markets (see chart).

On April 29th Volkswagen, Europe’s biggest carmaker (price-to-book ratio: 0.6) reported that its operating profit sank by 81% in the first quarter, year on year. The day before Lufthansa, which is trading at two-fifths of book value, said it may seek bankruptcy protection, as talks with the government over aid for...

via Business Feeds

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