Volkswagen prefs seen as long-term DAX member


FRANKFURT, Dec 21 (Reuters) - Volkswagen, a founding member of Germany's blue-chip index, will continue to be part of the DAX, with the replacement of the company's ordinary shares with its preferred counterparts seen as permanent.

Analysts said that concerns that the company's preferred shares -- set to replace the ordinaries on Wednesday [ID:nLDE5BI03O] -- will only have a cameo appearance in the index of Germany's top-30 companies, are unfounded.

They see as unlikely HeidelbergCement , VW's biggest contender for DAX membership , could replace the preferred shares of Europe's largest carmaker at the index's next review in March.

Such a development would mean index-tracking funds, such as exchange traded funds (ETFs), would no longer have to hold VW stock to match its weighting on the DAX, which could put downward pressure on the share price.

Volkswagen ordinary shares have been a prominent feature of the DAX since 1987, the year of its creation, but will drop out after Qatar on Friday said it took a 17 percent voting stake, pushing its free float below the 10 percent level necessary for inclusion. [ID:nLDE5BH1DN]

"We think that this is a long-term change in the DAX's composition and that the preferred shares will remain in the index for a long time," said Matthias Thiel, equity market strategist at MM Warburg.

At 1122 GMT, Volkswagen ordinary shares were 3.7 percent lower, compared with a 0.26 percent rise in preferred shares.

Thiel said he saw no risks in his view that the stock may be replaced by contender HeidelbergCement at Deutsche Boerse's next index review in March. [ID:nGEE5AO0YI]

HeidelbergCement pushed through a 2.3 billion euros ($3.30 billion) capital hike earlier in the year, boosting its freefloat.

"Regarding two of the key criteria -- market capitalisation and trading volume -- the preferred share is stronger than HeidelbergCement. But we do believe that HeidelbergCement stands a good chance to climb up into the DAX next year, but in exchange for another title," Thiel said.

LBBW analyst Anke Platzek said that VW preferred shares currently ranked 19th with regard to the market capitalisation of the free float and 28th in trading volume.

"Should the company issue new preferred shares in the planned capital increase, this will further strengthen the position of VW," she added.

Volkwsagen shareholders earlier in December approved a capital increase of up to 135 million freshly created preferred shares in the company. [ID:nWEA4334]

Almost all of the ordinary shares are held by the Porsche and Piech family, the German state of Lower Saxony and the Gulf nation of Qatar, which on Friday said it took a 17 percent voting stake in Volkswagen. [ID:nLDE5BH1DN]

Volkswagen's planned share issue is likely to double VW's weight to some 2.7 percent depending on the conditions of the capital increase, Heino Ruland, strategist at Ruland Research, wrote in a note.

"But such a change is (anything) but new, which caused us to strongly favour preferred shares as opposed to ordinary shares for a considerable period of time," Ruland added. ($1=.6978 Euro) (Reporting by Christoph Steitz and Hakan Ersen; Editing by Hans Peters)



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