Investors have not started panic selling German ETFs, despite the shock popularity of the nationalist Alternative for Germany (AfD) party, which gained 12.6% of the vote in the Federal Elections.
In Sunday’s election, the incumbent Chancellor Angela Merkel secured her fourth term in office with 33% of the vote, but this was considered a disastrous result for her alliance between the Christian Democrat (CDU) and the Christian Social Union (CSU) parties – the worst since 1949 and well below the 42% she gained in 2013.
Meanwhile, the social democratic party (SPD), which was previously in a coalition with Merkel, will now go into the opposition after suffering historic losses with just 20.5% of the vote.
The better-than-expected result for the far right AfD has renewed concerns over the rise of populism in Europe, as the party gains its first seats in the Bundestag.
However, both the flows and the performance of German stock ETFs do not appear to have been adversely affected, with small inflows of €3.8m seen on the 25 September – the Monday following the Federal Election. Over the month to that date, the ETFs have returned a healthy 3.5%.
In the run up to election day
Investors had been putting money back into German ETFs over the couple of months ahead of the Federal Elections on growing expectations of a Merkel win.
Data from Lyxor Asset Management and Bloomberg showed German equity ETFs had seen inflows of €385m and €593m in August and July respectively, the first monthly inflows since March.
The inflows pointed to growing confidence in the political stability in Germany and the eurozone as a whole, where fears of rising populism had subsided following the outcomes of the elections in the Netherlands and France, where far right candidates had been defeated.
It remains to be seen how the results of the German election affect matters long term, but the latest figures reflect a turnaround from the summer period, when German equity ETFs saw outflows of €1.2bn in the three months to the end of June on political worries.
German stock market
However, despite the recent inflows, the performance of the DAX index has remained lacklustre, with a fall of 0.26% between the start of July and 11 September.
Much of this has been caused by the strength of the euro, which had appreciated some 7% over three months to around $1.20, having a negative impact on local exporters. However, the election result seems to have dampened the currency, which is down to $1.18, a move that could alleviate the pressure on the stock market.
Meanwhile, over the year to 21 September, TrackInsight data shows German Stock ETFs have appreciated 21%, so for the long-term investors they remained a good opportunity over the period.
For those interested in the exposure, the German equity ETFs with the highest rating from TrackInsight are the iShares Core DAX UCITS ETF and Deka DAX UCITS ETF, with expense ratios of 0.16% and 0.15% respectively. Both funds track the DAX Total Return index and have a four-star rating.
The two products have shown very similar performance over the year, but the €8.7bn iShares ETF has seen outflows, while the €2.2bn product by Deka has been popular with investors.