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Text size [+][-]  Thursday July 2 2009GLOBAL EDITION

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29 Oct 2008 12:22

Off the tracks

By John Foley

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Shares in Volkswagen, the German carmaker, rose from a low of E200 on Friday to as high as E1005 on Tuesday after shareholder Porsche revealed it had exposure to 75% of VW's stock through shares and options. The share price rise was caused in part by funds who had sold borrowed VW stock buying up shares to cover their positions.

As of Wednesday lunchtime, the shares were trading at E589.

Deutsche Boerse, the German stock market operator, brought forward its reshuffle of the DAX headline index from December 22 to October 31 to reflect the unusual moves in VW's share price. Stocks are capped on a quarterly basis to ensure no single stock accounts for more than 10% of the index by value - but by Tuesday's close VW accounted for 27%.
The doubling in the German carmaker’s share price has distorted Germany’s DAX index. That wreaks havoc for anyone who has shorted the index or whose performance is measured against it. The proposed moves to fix the problem may not help – and could even make things worse.

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