German Stocks Fall to Lowest Since 2006; Hypo Real Estate Drops

By Michael Patterson

Oct. 6 (Bloomberg) -- German stocks fell the most in eight months, sending the DAX Index to the lowest since July 2006, as the deepening credit crunch forced the country's financial industry to double a credit line for Hypo Real Estate Holding AG and the government to guarantee personal savings accounts.

Hypo Real Estate, the nation's second-biggest commercial- property lender, tumbled 36 percent as the government and the country's banks and insurers agreed on a 50 billion-euro ($68 billion) rescue package after an earlier bailout faltered. Commerzbank AG, Germany's second-largest bank by assets, slid 13 percent and Allianz SE lost 7.4 percent.

The benchmark DAX Index dropped 5.1 percent to 5,502.48 as of 2 p.m. in Frankfurt, the steepest intraday slide since Jan. 23, as all 30 stocks in the index except for Volkswagen AG retreated. The HDAX Index of the country's 110 biggest companies fell 5.3 percent to 2,761.64.

``No more meaningful predictions can be made about capital markets,'' Thomas Koerfgen, a managing director at SEB Asset Management in Frankfurt, said in a Bloomberg Television interview. ``We have a crisis of trust.''

The DAX has slumped 32 percent this year as credit losses and asset writedowns sparked by the U.S. subprime-mortgage crisis topped $585 billion worldwide and pushed the global economy toward a recession. The German economy, Europe's largest, contracted for the first time in almost four years in the second quarter as demand for exports slowed.

Credit Line

Hypo Real Estate dropped 36 percent to 4.80 euros. Germany's financial industry agreed to double a credit line for the company to 30 billion euros, said Torsten Albig, a spokesman for Finance Minister Peer Steinbrueck. The federal government's guarantee for the credit line remains unchanged, Albig said.

The government met with banks and insurers in Berlin all day yesterday to discuss a revamped rescue package after private banks on Saturday withdrew their support for a 35 billion-euro rescue package brokered a week ago.

Aareal Bank AG, a commercial-property lender, slid 19 percent to 7.66 euros.

Allianz lost 7.4 percent to 91.77 euros. Europe's biggest insurer will invest $2.5 billion in Hartford Financial Services Group Inc. of the U.S., Hartford said in a statement today.

Commerzbank fell 13 percent to 12.37 euros. Deutsche Postbank AG, the country's biggest consumer lender by customers, declined 5.4 percent to 30.75 euros.

Consumer Deposits

Chancellor Angela Merkel said the government will guarantee personal savings for account holders. Consumer deposits, including the accounts of small, privately held businesses which make up the backbone of Germany's economy, added up to 568 billion euros at the end of 2007, Albig said in a telephone interview.

``Merkel had to do this to avoid panic account transfers,'' Otto Bernhardt, finance spokesman in parliament for Merkel's Christian Democrats, said in an interview.

The following stocks also rose or fell in German markets. Symbols are in parentheses.

Daimler AG (DAI GY) retreated 8.1 percent to 29.265 euros and Bayerische Motoren Werke AG (BMW GY) lost 3.9 percent to 24.87 euros. Exane BNP Paribas analysts reduced their earnings estimates for European auto companies by an average of 10 percent this year and 14 percent next year and advised clients to ``stay away from the sector'' until managements start providing ``more realistic forecasts.''

BMW and Daimler are the world's largest makers of luxury cars. MAN AG (MAN GY), Europe's third-biggest truckmaker, dropped 3.4 percent to 42.45 euros. Continental AG (CON GY), the region's second-largest car-parts maker, slid 7.3 percent to 47.74 euros.

Infineon Technologies AG (IFX GY) declined 4.7 percent to 3.92 euros. UBS AG reduced its share-price forecast for Europe's second-biggest maker of semiconductors to 6.30 euros from 7.30, saying weaker demand in its automotive and wireless businesses will reduce earnings.

IVG Immobilien AG (IVG GY) sank 14 percent to 5.54 euros. UBS lowered its recommendation for Germany's largest commercial property company to ``neutral'' from ``buy,'' saying the company is ``over geared'' and may cut its dividend.

K+S AG (SDF GY) dropped 10 percent to 39.05 euros. WestLB AG downgraded Europe's largest producer of potash used in fertilizers to ``reduce'' from ``buy,'' saying investor concern that agricultural commodities won't rally and weaker demand for fertilizers will weigh on the shares.

Corn, wheat, rice and soybean futures fell at least 4.1 percent today.

Kontron AG (KBC GY) declined 2.2 percent to 7.03 euros. The maker of miniature computers that said today it bought Intel Corp.'s communication server business had its share-price target lowered to 9.50 euros from 16.50 at UniCredit Markets & Investment Banking, who cited a ``weak'' outlook for the telecom equipment industry.

Premiere AG (PRE GY) slid 23 percent to 3.55 euros, following a 50 percent slump on Oct. 3. Brokerages including Goldman Sachs Group Inc. and UBS lowered their share-price estimates for Premiere after the German pay-television company partly owned by News Corp. forecast a 2008 loss and said its chief financial officer quit.

Siemens AG (SIE GY) lost 9.7 percent to 55.19 euros as UBS reduced its share-price estimate for Europe's biggest engineering company 4.8 percent to 100 euros, citing weakening economies.

ThyssenKrupp AG (TKA GY) dropped 8.7 percent to 18.81 euros. UBS reduced its earnings estimates for Germany's largest steelmaker by 20 percent in fiscal 2009 and 21 percent in 2010, saying recessions next year in the U.S. and Europe will cause steel prices to fall faster than they previously expected. The brokerage cut its share-price projection to 35 euros from 60.

Salzgitter AG (SZG GY) slid 9.9 percent to 61 euros as UBS lowered its share-price forecast for Germany's second-biggest steelmaker to 95 euros from 145. Kloeckner & Co. SE (KCO GY) lost 8.5 percent to 13.42 euros. UBS cut its price prediction to 25 euros from 50.

To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net.