Germany's DAX Index Climbs as Volkswagen Rallies; Insurers Fall

By Stefanie Haxel

Oct. 28 (Bloomberg) -- Germany's DAX Index advanced as Volkswagen AG extended yesterday's record gain, overshadowing concern a deteriorating economic environment will curb profits.

Volkswagen, which became the world's biggest company by market value after Porsche SE announced plans to raise its stake in the carmaker, rallied 54 percent. Munich Re, the world's biggest reinsurer, slid 5.7 percent and Hannover Re sank to a seven-year low. European insurers are still facing ``near-term headwinds,'' analysts at Credit Suisse Group AG said.

The benchmark DAX Index advanced 408.36, or 9.4 percent, to 4,743 as of 2:04 p.m. in Frankfurt. DAX Index futures expiring in December gained 9.5 percent. The HDAX Index of the country's 110 biggest companies climbed 8.4 percent.


The DAX Index is on course for a 19 percent drop in October and has slumped 41 percent this year on concern bank bailouts in the U.S. and Europe won't prevent a recession as credit-related losses and writedowns reached almost $680 billion in the worst financial crisis since the Great Depression.

``Investors are hoping for temporary stabilization after the incredible phase of declines,'' said Carsten Klude, an investment strategist at M.M. Warburg & Co. in Hamburg, which oversees the equivalent of $20 billion. ``However, there's no doubt we are heading toward a recession. The great unknown is how much earnings will suffer.''

Volkswagen rallied 279.2 euros to 799.2, fueled by Porsche's plan to raise its stake in Europe's largest carmaker to 75 percent. The stock, which accounts for more than a quarter of the DAX, earlier jumped as much as 93 percent, following yesterday's 147 percent gain.

`Speculative Buy'

HSBC Holdings Plc lifted its recommendation for Volkswagen to ``neutral'' from ``underweight,'' while DZ Bank upgraded the shares to ``speculative buy'' from ``sell.''

Munich Re dropped 4.89 euros to 81.60, the lowest since November 2004. Hannover Re, Germany's second biggest reinsurer, fell 64 cents, or 4.1 percent, to 15.17 euros, the lowest since 2001.

``A deeply uncertain macroeconomic outlook, partial nationalization of global market leader AIG and a fear that we will see a repeat of the 2002-2004 industry capital raisings have all taken their toll on the sector,'' London-based Credit Suisse analysts including Richard Burden and Paul Lloyd wrote in a note to clients today. ``We cannot rule out capital raisings across a number'' of companies.

Allianz SE declined 1.86 euros, or 3.6 percent, to 50.15, the lowest in more than five years. Merrill Lynch & Co. lowered its share-price estimate for Europe's largest insurer 13 percent to 100 euros.

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

DAB Bank AG (DRN GY) slid for a sixth day, losing 11 cents, or 4.6 percent, to 2.28 euros. The online broker controlled by Italy's UniCredit SpA posted a wider-than-expected loss in the third quarter amid writedowns related to the collapse of Lehman Brothers Holdings Inc. and said it doesn't expect to reach its full-year target.

Symrise AG (SY1 GY) dropped 1.08 euros, or 13 percent, to 7.49, the lowest since selling shares in December 2006. The flavor and fragrance supplier to Groupe Danone and Christian Dior SA reported third-quarter profit that missed analysts' estimates and said demand is slowing.

To contact the reporters on this story: Stefanie Haxel in Frankfurt at shaxel@bloomberg.net.