Volkswagen May Face DAX Ouster as Deutsche Boerse Changes Rules

Oct. 31 (Bloomberg) — Volkswagen AG’s common shares may face removal from Germany’s DAX Index as early as next week after the benchmark’s compiler changed inclusion rules to stem disruptions spurred by gyrations in the automaker’s stock.

Deutsche Boerse AG, operator of the Frankfurt stock exchange, said in a statement today that from Nov. 3 it may at any time remove a DAX stock whose weighting exceeds 10 percent and whose share price over the preceding 30 trading days had annualized volatility of more than 250 percent.

“The exchange wants to guard that indexes are reliable and not exposed to these unusual swings,” said Carlos Sanchez, a sales trader at Interdin Bolsa SVB SA in Madrid. “It would seem like Volkswagen common shares are on the way out.”

Volkswagen’s weighting will be cut to 10 percent at the end of trading today and may increase next week if the shares outperform the benchmark. The stock’s volatility has climbed to about 395 percent in the past 30 days, Bloomberg data show.

“They are trying to make changes outside the prescribed time frame and give themselves freedom,” said Mamoun Tazi, a London-based exchange analyst at MF Global Securities Ltd. “It’s wise given the current environment. It’s probably provoked by Volkswagen.”

Volkswagen’s weighting in the DAX rose to 27 percent this week after the shares jumped fourfold in two days. The share surge meant Volkswagen was having a disproportionate effect on the DAX, sparking complaints from investors.

“It’s indeed a measure that can be taken at any time for any stock and not just at the next quarterly re-weighting” on Dec. 3, said Frank Herkenhoff, a Frankfurt-based spokesman for Deutsche Boerse. He declined to name any specific stocks that would be affected.

To contact the reporters on this story: Alexis Xydias in London at axydias@bloomberg.net; Nandini Sukumar in London at nsukumar@bloomberg.net.

Last Updated: October 31, 2008 12:05 EDT
By Alexis Xydias and Nandini Sukumar

Source: Bloomberg

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