Market Overview: Frankfurt Stock Exchange (DAX) 2011, wk.

14
After significant fluctuations, a small positive tendency can be observed in the
Frankfurt Stock Exchange, as the DAX index has increased by 0.52% over the
week 14. The small gain at the beginning of the week was lowered by a
remarkable decline of 0.5% on Thursday. This tendency was observed in most
markets, as U.S. and European stocks fell after another earthquake measuring 7.4 shook
northeast and eastern Japan.

Figure 1Changes in theDAX index during the week 14

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Bright forecasts regarding the overall Germany economy have been announced this week, despite
the economic disruption caused by Japan's nuclear crisis and rising energy prices. On Thursday,
leading German economic institutes have stated that they expect the economy to expand by 2.8
percent this year. Unemployment in Germany is already at its lowest level since the country
reunified in 1990 (predicted to be 6.9% in 2011).

The biggest winners of this week were Deutsche Boerse (DB1) with a gain of 3.77% and
E.ON (EOAN) with a gain of 2.88%. In contrast, it was most unfortunate for BMW (BMW.DE)
and Aixtron AG (AIXA.DE), which faced a decline of 4.62% and3.2% respectively.

The top-performing stock in the German stock market this week was Deutsche Börse AG (DB1),
the operator of the Frankfurt Stock Exchange. The stock rose roughly 3.77% from its Monday’s
opening price of €52.47, mainly due to the ongoing all-out bidding warbetween Deutsche Boerse
and Nasdaq/ICE to merge with NYSE Euronext. On Monday, the stock fell 0.8% to €52.05 after
UniCredit downgraded it from “buy” to “hold” as “the risk/return profile for Deutsche Boerse
shareholders has deteriorated”. The company also had not decided whether to increase its $10.2B
offer for NYSE Euronext in reaction to an $11.3B bid that Nasdaq and Intercontinental Exchange
made on Friday. On Wednesday, Reuters reported that Deutsche Boerse does not plan to raise its
bid; however, a ‘source close to a situation’ said that the merger between NYSE and Nasdaq would

1 Market Overview is not an advice. Neither authors nor iFund or other representatives are liable for possible use of information contained in
it. Relatively reliable public information (Exchanges websites, Bloomberg, Reuters, etc) was used to produce this Market Overview.
Market Overview: Frankfurt Stock Exchange (DAX) 2011, wk. 14
be strategically unattractive due to antitrust problems, which resulted in a slow climb of
DeutcheBoerse’s shares. The shares advanced 1% the next day and rallied 2.9% on Friday to €54.45
as investors speculated that NYSE Euronext will reject the rival takeover bid. The further
development of Deutsche Boerse’s initiative to create the world’s largest equity exchange will
directly impact the stock price. Although Nasdaq/ICE bid is higher and more attractive because of
the cash component (the bid of $42.48 a share includes $14.24 in cash), the merger with Deutsche
Boerse would ensure global market and cause less regulatory uncertainty. The NYSE Euronext’s
board of directors plans to meet on April 14th. If the board rejects Nasdaq OMX Group’s bid, the
shares of Deutsche Boerse are very likely to have significant gains.

Figure 2 Performance of Deutsche Boerse (DB1) (week 14)

The second stock with significant weekly gains was E.ON AG (EOAN), which operates in power
generation and gas production businesses. The shares advanced 2.88% as the Fukushima disaster
raises worries over safety of nuclear energy in Europe. The stock remained stable on Monday and
started a slow decline on Tuesday morning. As the U.K. Climate Change Minister said that the
government would not halt the work on building new nuclear power plants, the shares rose sharply
1.65% to €21.99. The stock declined in early trade on Wednesday, but soon recovered and
continued to rise for the rest of the day. On Friday, E.ON rose 1.2% as UBS AG added the shares to
its “most preferred” list of European stocks, arguing that shutting nuclear power plants in Germany
will “put upward pressure on both power price and thermal spreads,” while the company’s shares
remain cheaply valued. If Germany continues the Fukushima-inspired anti-nuclear policy, the
power prices will inevitably increase and the country will become more dependent on natural gas
and alternative energy sources, potentially increasing E.ON’s profits and the share of the power
market.

2 Market Overview is not an advice. Neither authors nor iFund or other representatives are liable for possible use of information contained in
it. Relatively reliable public information (Exchanges websites, Bloomberg, Reuters, etc) was used to produce this Market Overview.
Market Overview: Frankfurt Stock Exchange (DAX) 2011, wk. 14

Figure 3 Performance of E.ON (EOAN) (week 14)

The biggest loser of week 14 was BayerischeMotorenWerke AG or BMW (BMW.DE). The fall in
share prices took place in last two days of the week. Altogether the change in price was -4.62%.
The opening price was €61.39 whereas the closing price on Friday was only 58.54 %. From
Monday to Wednesday’s evening the price was fluctuating at around €61 per share. BMW is a
German automobile, engine and motorcycle manufacturer. The company owns such brands as Mini,
Rolls-Royce and Husqvarna. This Munich-based company has about 95000 employees around the
globe and operated with 3.2 billon profit in 2010. 46.7 % of shares are owned by Quandt family,
which acquired ownership in late 1960’s. The rest of the shares are in public float.

Although on Friday’s morning BWM was able to announce an optimistic forecast for sales in 2011,
this didn’t translate in activity of investors. BMW is expecting to sell 1.5 million cars in 2011,
which is a slight increase compared to theprevious year. The rapid decrease in share prices came
from the Portuguese government plea for financial support from the European Union. This helped
the banking sector leading to decent rise in share prices, especially in Portugal. On the other hand,
automobile industry faced downward trend in share prices since the European Central Bank is
considering raising interest rates in order to fight inflation in the euro zone. (Financial Times)

Figure 4 Performance of BMW shares (red) and DAX Index (green) (week 14)

Not as bad as for BMW, but still unfortunate was week 14 for Aixtron AG (AIXA.DE). During the
week, its price reduced by 3.2%. The opening price on Monday was €31.09. The first session ended
in a slight increase of€0.10, i.e. 0.30%. The next three days was a period of steady decrease in

3 Market Overview is not an advice. Neither authors nor iFund or other representatives are liable for possible use of information contained in
it. Relatively reliable public information (Exchanges websites, Bloomberg, Reuters, etc) was used to produce this Market Overview.
Market Overview: Frankfurt Stock Exchange (DAX) 2011, wk. 14
Aixtron share prices. This fall stopped on Friday when price per share gained about 0.15 %
back.Aixtron AG is a Germany-based company which manufactures metalorganic chemical vapour
deposition equipment. These products are used in the semiconductor industry and are installed into
wide range electronic devices. The target market of the company is Asia, where company sells more
than 90% of its production. Compared to BMW, this is a quite small company employing only
about 800 employees. However,it managed to operate with profits reaching €192M in 2010.This
week, the increase of share price, which started at 24th of March, was interrupted. Research of
MadeemMoulvi included Aixtron among top ten most profitable companies with high expected
growth rates.(http://seekingalpha.com)

Figure 2 Performance of Aixtron AG shares (red) and DAX Index (blue) (week 14)

The oil prices are growing at high speed, putting pressure on consumer and transportation sector.
Libya’s oil production will no longer come even close to its past levels due to destruction of the
infrastructure.

And finally, news of the week was that the European Central Bank raised the interest rate by 0.25
percentage points to combat the inflation. ECB will not put in danger leading countries to aid even
more the peripheral ones. Still, this shouldn’t have a major influence, as Spain is becoming less
likely to default each day, while debt restructuring of Greece is already out of the question. Fear
about USA’s inflation and EU’s measures to recover the economy will decrease the attractiveness
of US and will allow moving to more risky assets of the European region.
Therefore, the future of the market looks promising, excluding some highly oil-dependent
companies.

4 Market Overview is not an advice. Neither authors nor iFund or other representatives are liable for possible use of information contained in
it. Relatively reliable public information (Exchanges websites, Bloomberg, Reuters, etc) was used to produce this Market Overview.