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Equity culture: Germany must not fall further behind

14 Aug 2017

Equity culture: Germany must not fall further behindBased on a speech by Joachim Faber


Joachim Faber, Chairman of the Supervisory Board of Deutsche Börse AG

The capital market in Germany is underutilised

Let me start by giving a simple figure: the ratio of the value of all domestically listed companies to GDP. This is a key measure of how much a country’s capital market contributes to its economic success.

  • In Germany, the figure for 2016 was just under 50 per cent. This is extremely low by international standards.
  • In the USA, the equivalent figure was 147 per cent – three times as high,
  • in Switzerland, it is more than four times higher, at 213 per cent,
  • and even France – where many areas of the economy are determined by the state and the unions rather than being market-driven – outdoes us, with a figure in excess of 87 per cent.


These data don’t mean that we should be aiming to model ourselves on Switzerland or America at all costs. No – our economy is too successful for that. But there’s one conclusion that we can certainly draw from this comparison: in Germany, we’re not making nearly as much use of the capital market as we could be.

Germany and the EU are falling behind globally

As a result, we are in danger of falling behind our competitors at a global level. This can be seen from a new study by accounting firm PwC:

  • 55 of the 100 largest companies in the world, measured by market capitalisation, are from the United States.
  • What is more, all of the top 10 are from the US. This is due to household names such as Apple, Microsoft, Amazon and Alphabet – the holding company that owns Google.
  • Large institutional investors such as Berkshire Hathaway are also among the leaders in this global ranking – and it’s precisely investors like these that are lacking in Europe.
  • As a result, Germany ranks 7th in absolute terms among those countries with top 100 companies by market capitalisation – behind the US, China, the United Kingdom, Switzerland, France and Japan.
  • Even worse: since 2008, the year of the financial crisis, the European Union has in fact lost 10 out of the top 100 companies. Today, there are only 22 EU companies on the list.


In the long term, this could mean that Europe is no longer able to compete for reasons of size as certain markets continue to consolidate. In this case, the future of the global economy will no longer be decided in Frankfurt, Paris, Milan or Madrid, but in Shanghai, Hong Kong, New York or Chicago.

Equity culture in Germany: potential for improvement

The more fundamental reason for this imbalance relates to the vibrancy of the equity cultures concerned. We Germans invest in shares far less than is the case elsewhere. The Deutsches Aktieninstitut regularly collects and publishes information on the proportion of a country’s adult population who invest in shares.

The results of the survey show that:

  • The percentage of people owning shares stagnated in 2016 at a mere 14 per cent, despite the rise in DAX®.
  • Only one in seven German citizens – roughly 9 million people – are invested in equities funds.
  • That having been said, the number of people owning shares did increase, especially in the second half of 2016.
  • This trend has probably continued in the current year, although the figures for this won’t be available until early 2018.


But what is definitely clear is that Germany’s equity culture is far less well developed than the culture in comparable countries, while the role that the capital market plays for companies is comparatively small by international standards. However, this also means that there is a great deal of potential for improvement. And, in turn, that there are growth opportunities for Deutsche Börse Group and for Frankfurt as a financial centre.

This article is based on a speech given in front of the Verband Familienunternehmen on 31 July 2017.

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