Exploring the Opportunities of Investing in the European Markets Through Eurex Micro-Dax Futures

09 Jun 2023

By Eric Lee, Sales Director, Phillip Nova

Singapore investors traditionally focus on investing in Asian markets such as Singapore, Hong Kong, and China, as well as the United States due to its technological advancements and dynamic financial market. However, the geopolitical tensions between the US and China have created a dilemma for investors in these markets. To mitigate this risk and enjoy several key benefits, it is increasingly important to include European markets in an investor’s overall portfolio.

Europe offers a diverse range of developed and emerging economies, presenting investment opportunities across various industries and sectors. By investing in European markets, investors gain access to well-established companies with global reach, benefiting from their stability and long-term growth potential. Europe’s robust financial infrastructure, strict regulatory frameworks, and high governance standards instil confidence and protect investor interests. Additionally, the European market provides access to a large consumer base and opportunities for cross-border trade and investment.

Diversifying portfolios internationally helps mitigate risks associated with concentrating investments in a single geographic region. Furthermore, Europe’s economic integration through the European Union fosters a favourable business environment with the free movement of goods, services, and capital. Investing in European markets also allows exposure to various currencies, potentially enhancing returns through currency diversification.

Eurex serves as the gateway for international investors looking to invest in the European market. As one of the largest derivatives exchanges worldwide, Eurex offers a reliable and efficient platform for trading stock index futures, including the prominent Dax Index futures. The Dax Index represents the top 40 blue-chip companies listed on the Frankfurt Stock Exchange, making it a highly influential benchmark in European financial markets. These companies are some of the largest and most established in Europe and the world, with a rich history dating back several centuries.

The movement of Dax futures is influenced by various factors, including economic indicators, global market trends, and geopolitical events. One crucial factor is the exchange rate between the Euro and US dollar, as a stronger Euro can impact the competitiveness of Dax-listed companies. The Germany Consumer Confidence Index reflects sentiment and spending intentions of German consumers, influencing economic outlook, consumer spending, and corporate earnings. Additionally, the Germany Composite Purchasing Managers’ Index (PMI) provides insights into the economic health of the manufacturing and services sectors.

Global market trends, political developments, trade tensions, and macroeconomic data from major economies can also affect Dax futures. Traders and investors need to stay informed about these factors and monitor relevant news and events that could impact Dax futures’ performance.

The top 10 of the 40 composite stocks have a combined weightage of 60% of the Dax Index and is representative of 45% of the total market capitalisation of the entire listed companies in the Frankfurt Stock Exchange. Understanding these top 10 stocks of the Dax Index, which hold significant weightage, is crucial for trading Dax futures effectively.

Company	Sector	Ticker	Index weighting (%)1	Market Cap	Forward Price-to-Earnings	Price-to-Book	5 Years Revenue Growth
SAP	Technology	SAP.DE	10.1	$143.65B	23.2	3.57	5.50%
Siemens	Industrials	SIE.DE	9	$125.63B	14.64	2.78	-4.00%
Allianz	Financial Services	ALV.DE	7.1	$84.31	9.03	1.49	3.90%
Bayer	Healthcare	BAYN.DE	4.8	$51.02B	7.2	1.25	5.00%
Mercedes-Benz Group	Automobile	MBG.DE	4.8	$77.07B	5.63	0.9	-4.10%
Infineon Technologies	Technology	IFX.DE	3.9	$46.08B	13.33	3.03	10.50%
Munich Re	Financial Services	MUV2.DE	3.6	$46.61B	11.67	2.21	7.20%
BASF	Basic Materials	BAS.DE	3.5	$41.58B	10.38	1.02	7.90%

Sources: Wikipedia and Gurufocus.com

For a limited time until August 31, 2023, Phillip Nova is offering a zero-commission promotion for trading Micro-Dax futures. This presents a great opportunity for traders interested in Dax futures. Additionally, a webinar titled “Mastering Micro DAX Futures: Small Contracts, Big Opportunities” will be conducted, covering various factors influencing Dax futures movements and a simple yet effective trend-following strategy for trading on the index. Details and registration for the webinar can be found below:

Trade Micro-DAX® Futures and Micro-EURO STOXX 50® at 0 Commission*

FREE Webinar about Opportunities in the European Market

On Tue 25 Jul at 7:00 pm, you will discover the immense potential of Micro DAX Futures and unlock a world of opportunities in the mini-sized market.

Register for the webinar here.

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Where to trade/invest in the European Market?

In Phillip Nova, Micro-Dax Futures contract (a stock market index consisting of 40 major German blue chip companies) is available for trading on Nova trading platform.

You can register for trading demo account through the following links listed below to try out our platform.

Value-Added Service from Eric Lee

My clients benefited from my services including investment advisories in unit trust and stocks, investment insights based on my personal knowledge and experiences navigating through the markets the past 20 years.

Where periodically, I will be sending out market analysis to my clients, as well as alerting them of support and resistance levels for the technical indicators which I am utilising on a chart. Click on the button at the bottom if you would like to arrange for a One-to-One Coaching session to learn more about trading futures, forex, stocks and more, and how you can benefit from the services I provide.

Eric Lee is a Sales Director with Phillip Nova. With expertise in Futures, Forex, Stocks, and Unit Trust, Eric makes an all-rounded advisor. Make informed trading decisions without spending time combing through endless information as Eric readily provides clients with trade alerts and insights via WhatsApp. Over his years of experience, Eric developed systematic strategies in trading and investing. Book a complimentary coaching session below to leverage on his expertise as he imparts his knowledge to enhance your trading journey.

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An Exchange Traded Fund (ETF) is a marketable security that is formed to track nearly anything, ranging from a specific index, sector, commodity, or increasingly, theme. They are most commonly used to track a basket of stocks, and can typically be accessed through the same channels as regular stocks. ETFs are typically separated into passively-managed ETFs that simply mirror the security they are tracking (e.g. the STI), and actively managed ones that attempt to deliver higher returns or specific investment objectives, often with a pre-specified theme in mind (e.g. ARK Invest’s Innovation ETF).

Why should I trade in ETF CFDs?

ETFs have been growing in popularity over the years. 2020 was the best year for ETFs yet, with global equity ETFs seeing more than $1T in inflows within a 12-month period. Using CFDs to gain exposure to ETFs allows for greater capital efficiency because only a portion of the contract value is required as margin to establish a position.
ETFs are particularly popular with investors seeking a relatively hassle-free investing experience, while desiring exposure to a range of specific and relatively understandable securities. Trading ETF CFDs brings greater convenience by eliminating the need for traders to hold multiple currencies in order to access global ETFs.
An investor wanting exposure to the post-pandemic economic recovery could open a position in the well-known SPDR S&P 500 ETF (SPY), which tracks the performance of the S&P 500. Another investor that may be convinced of the future importance of Environmental, Social and Governance concerns (ESG) may find the increasing selection of ESG-themed ETFs that track a basket of high ESG-rating companies to be a good investment, rather than cherry-picking individual equities by hand. ETF CFDs can act as a powerful tool for traders can profit from both directions of the market by taking on long or short positions.

A look at two ETF CFDs we offer:

1) Has the ARKK been sunk?

ARK Innovation ETF (ARKK) ARKK is an actively managed ETF by ARK Invest that invests in a range of companies based on their innovative and industry-disrupting potential. ARKK’s largest holdings are in companies such as Tesla, Square, and Zoom. ARKK is down around -33% from peaking on 12^th Feb and is currently in the red for the year to date as the market experiences a risk-off outflow of funds. Superstar fund manager Cathie Wood has however been consistently doubling down on her bets, buying even more shares in growth stocks that are going through their own tumultuous periods such as DraftKings, Peloton, Teladoc, and Tesla. In her view, ARKK is playing the long game, and remains steadfastly convinced in the long-term prospects of these growth stocks beyond this current bout of volatility. Similarly on outflows, investors are still betting big on ARKK as ARK Invest has only lost about $1.2B in assets this year across all its six funds, compared to seeing an inflow of $15.1B during the same period. Recently, investors have been nervously eyeing ARKK’s basket of tech stocks as their future earnings potential remain vulnerable to erosion through high inflation – the dominant concern of the market in recent weeks. As commodities – the major contributor to the recent heightened inflation fears – drops sharply from record highs, are investor concerns over hyperinflation overblown?

2) Searching for exposure to Asian equities?

iShares MSCI Asia ex Japan ETF (AAXJ) The AAXJ is currently trading -10.6% adrift of all-time highs seen in February, giving up gains in tandem with an Asia-wide equity sell-off at the time. Given that slightly over 40% of the ETF’s holdings are based in China, the ongoing tumult seen in Chinese equities currently have carried over nearly perfectly in the AAXJ, as Chinese investors take a breather after the stellar gains made over the past year. Looking ahead, Asia – and particularly China, is steaming ahead with its economic recovery. China is widely expected to be one of the best-performing major economies this year, providing a major boost to the outlook for corporate earnings. As the rest of Asia and the world gradually opens up their own economies, AAXJ is likely to again benefit from strong Asian outperformance amidst a strengthening trade outlook.

CFD is available for trading on Phillip MetaTrader 5 (MT5).

Features of trading CFD:

Trade in both the bull and the bear markets
The ability to enter a long and/or short position allow traders to take advantage of both rising and falling markets.
Smaller barrier to entry
Flexible and smaller contract sizes. This means that traders will be able to enter into a contract with a modest amount of capital.
No expiration date or risk of delivery
Unlike futures which commonly have a fixed expiration date, CFD allows traders to perpetually hold the position(s). CFD is cash settled, no need to worry about the delivery of the underlying asset.

Benefits of using Phillip MT5:

Trade at zero commission on a dynamic platform that offers low spreads. Integrated with Autochartist and Trading Central Indicators, and available on mobile, web and desktop app, you will never miss a trading opportunity with Phillip MT5.

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