Highlighting the Opportunities on Germany's Dax Index

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This week…
• Reviewing the DAX index
• A look back at several
previous Dax calls
• Germany's Dax
constituents

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Invast.com.au 1800 468 278
General Advice & Risk Warning
Please note that any advice given by Invast staff is deemed to be GENERAL advice, as the information or advice given
does not take into account your particular objectives, financial situation or needs.
Therefore at all times you should consider the appropriateness of the advice before you act further.
CFDs and Forex are leveraged products and carry a high level of risk and are not suitable for everyone. You can lose
more than your initial deposit so you should ensure CFD and Forex trading meets your investment objectives. We
recommend you seek independent advice. Strategies and charts used in this presentation are for example only. You are
reminded that past performance is not indicative of future performance.
Invast Financial Services is regulated by ASIC. It's important for you to read and consider the relevant Product
Disclosure Statement and Financial Services Guide which contains details of our fees and charges before you decide
whether or not to acquire any financial products. These documents are available at www.invast.com.au
Invast Financial Services Pty Ltd ABN: 48 162 400 035. Australian Financial Services Licence No.438 283

33
This week we look at the following topics:
• Reviewing the DAX index
• A look back at several previous Dax calls
• Germany's Dax constituents

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Dear Readers,
Our analysis this year has so far touched on the 2015
broader Outlook Guide and in February we focused on
Australian listed companies. The new push this year is on
individual stocks, powered by Invast’s new DMA platform.
The benefit of this platform is that it provides direct market
access into several global exchanges.
Our focus in March will be to analyse these major exchanges,
as represented by key indices. Indices are important to
understand even if you trade underlying stocks. All of the
indices that we touch on in March are traded through
Invast’s MT4 platform, which remains a powerful trading tool
and part of the overall Invast toolbox for traders.

55
In April we plan to focus on individual stocks across these indices and we will group
these stocks into various trading baskets across four individual weeks. But before that
can occur, we need to study and analyse to see where each index is currently trending.
Our analysis will be broken up as follows:
Week commencing 2 March 2015: Outlook for the German DAX30
 Week commencing 19 March 2015: Outlook for the UK FTSE100
 Week commencing 16 March 2015: Outlook for the US S&P500
 Week commencing 23 March 2015: Outlook for the Australian ASX200
 Week commencing 30 March 2015: Outlook for the Hong Kong HSI50
 Week commencing 2 March 2015: Outlook for the German DAX30

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We start the month by looking at the DAX, perhaps one of the indices which we have
been very bullish on. Our conviction has been reiterated in our Invast Insights reports
and blog posts on the Invast website. We didn’t just wake up one day and think that
the DAX is a good trading opportunity. Our thoughts have been deep and based on
extensive analysis, underpinned by a European Central Bank which is determined to
avoid deflation and contagion for member states.

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Chart: GER30 daily price chart as quoted on Invast MT4 platform

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Here is a brief chronology, spanning the last six months, of what Invast has published
on the DAX30 index:
- August 2014: “…German multinational companies – most of which make up the top
10 stocks on the DAX – would love to see two things. The first is a weaker Europe which
will help increase the amount of translated earnings back home and also make them
more competitive against other global counterparts. The Euro will continue to decline
against the US dollar, it is still too high. It won’t happen overnight, but it will happen as
the US dollar strengthens.
The second major stimulus is cheap money – when companies can borrow at 1-2% it
becomes easier to go out and undertake corporate deals on businesses yielding 5-10%
which means even paying a 20x price to earnings ratio for an acquisition target is
accretive if completely funded by debt, excluding any corporate synergy benefits.

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Watch for more M&A activity which will add stimulus to market valuations. German 10
year treasury yields are now at 1%, down 80 basis points over the past year. For this
reason, I remain a big believer in the scope for the European markets and the DAX in
particular, to become solid markets in the next year or two. Germany won the world
cup soccer finals this year and the nation is still the fourth largest economy in the
world, behind Japan, China and the USA respectively, when measured by nominal
GDP...” Source here from Invast website.
- September 2014: “…It might be tempting to take such a quick profit on the DAX but I
really do believe the moves we have recently seen are part of a major growth period of
Europe and global capital will start to readjust allocation into these markets as the
financial numbers start to bare fruits from cheap money flooding into the system…”
Source here from Invast website.

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- October 2014: “…Today I see the DAX around 400 points below the August level,
currently at around 8900 as of the time of writing. The huge trading range is a
reflection of uncertainty in the market. The most important factor for me is the fall in
the Euro. This is a huge boost for Germany multinational businesses which make up a
large portion of the DAX.
I’ll be watching the DAX very closely over the next week or so to see where it stabilises.
It should find some strong support here, if not then there could be another large
downward leg towards 8500. I’m not a technical analyst and so my exact levels are not
precise, merely a guide for short term price action. What I am fairly confident of is the
record low interest rates in Europe and the falling in the EUR/USD will eventually
remain huge growth drivers for German multinational businesses that dominate the
DAX index and this needs to be taken into account for anybody trading the DAX index…”

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- December 2014: “One of my key convictions has been around the resilience of Europe
and the fact that I believe Draghi will act to reassert the ECB’s authority and credibility
sometime in the first half of 2015. When that occurs, European stocks including major
indices like that DAX will have scope for further upside.
These are the types of share price moves I watch for. These are the signs that confirm
to me European companies are now ready to start drawing up on record low debt and
making significant company changing deals. These are the types of deals that move
stock markets. There are significant downgrades going on in European companies at
the moment but stock market traders look forward, not backwards. The stock market
usually front-runs the economy by around 6-12 months and so 2015 will be about
Europe’s future into the later part of this decade, not its problems in the first half.

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So what’s the point of reiterating all of these notes? Many traders will by now know
that the DAX has rallied around 31.5% from its October low – that’s in a period of
around 6 months. Throughout this period, we were holding on to the view that the
DAX is fundamentally a major beneficiary of what the ECB plans to do. Many at the
time were doubting the willingness and capacity of the ECB to act. But not us. We
stuck to our guns and put our view on the table despite the technical analysis
suggesting negative patterns and financial market community doubts on more ECB
stimulus.

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The lesson here is that fundamentals are important. It is essential to maintain your
ground in markets and focus on the big picture. The DAX rally has been part of a big
picture story which we have been building now for a while.
In fact it’s not just the last six months, we first
started publishing our bullish DAX news in
October 2013. You can read that report here.
The DAX tends to be our main focus for
European shares because of the size and high
quality of index constituents on offer.

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Bottom line: Our conviction on the DAX has not yet changed, we remain positive.
There might be a short term pullback but we haven’t yet seen merger and acquisition
euphoria that would prompt us to call a top in the index. Many might see the DAX’s
recent run and think that gains have been priced in. We still think that the merger and
acquisition environment is yet to completely respond to the ECB’s action. The DAX is
still our preferred European index exposure. The ECB’s actions come with
repercussions and certain issues like Greece are still not yet solved. These are all minor
considerations though for the top 10 German multinational businesses.

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DAX Index Constituents
If you’re trading the DAX, you should know which companies make up the majority of
the index and how these companies benefit from the ECB stimulus action. Almost all of
the top 10 stocks on the index benefit immensely from a lower EURUSD relationship
and cheap debt. This is the perfect mix for large, multinational businesses like those
listed below. The following is a breakdown of the MSCI Germany index, which isn’t
exactly the same as the DAX, but close enough for illustration purposes.

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Top 10 MSCI German index constituents

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Next week our focus will be on the FTSE. Our view is not as favourable as the DAX
because the UK economy still has some pain to work through. The index composition
of these UK names is different to that of the DAX. We will go through these differences
and how monetary policy means different results for each respective index.
Also, make sure to register early for our March webinar, with details below. Link will be
on the Invast website under Resources > Online events.

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Outlook on major global indices – a correction coming?
Invast Insights chief editor and contributing author Peter Esho will summarise his
outlook on the major global indices in March. Esho will document his findings based
on the performance of key stocks across these indices and where he believes the big
opportunities lie throughout this year. His presentation will focus on the following 5
themes:
Outlook on the German DAX30
Outlook on the UK FTSE100
Outlook on the US S&P500
Outlook on the Australian ASX200
Outlook on the Hong Kong HSI50

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Esho is a regular contributor on CNBC, Bloomberg and host of ‘Your Money Your
Call’. His webinar will cover both the fundamental and technical outlook on these
key themes and a basic introduction to Invast’s new DMA CFD product offering
which complements MT4 and other services. This webinar is expected to fill fast.
Q&A will be open straight after the presentation. Register now by visiting
www.invast.com.au/webinars.

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Go to www.invast.com.au/insights to get a
complimentary 4 week trial and receive the latest
insights as they are published to our live clients.

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Disclaimer
Please note that you are receiving this report complimentary from Invast Financial Services Pty Ltd
(AFSL 438 283). Invast staff members may from time to time purchase securities which are
included in this or future reports. The authors of this report may or may not be holding a position
in the securities mentioned. Please note that the information contained in this report and Invast's
website is of a general nature only, and does not take into account your personal circumstances,
financial situation or needs. You are strongly recommended to seek professional advice before
opening an account with us.
General Disclaimer: This newsletter contains confidential information and is intended only for the
person who downloaded it. You should not disseminate, distribute or copy this newsletter. Invast
does not accept liability for any errors or omissions in the contents of this newsletter which arise
as a result of downloading this newsletter. This newsletter is provided for informational purposes
and should not be construed as a solicitation or offer to buy or sell any financial product. Invast
Financial Services Pty Ltd is regulated by ASIC (AFSL 438 283 | ABN 48 162 400 035).

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Risk Warning: It's important for you to read and consider the relevant Product Disclosure
Statement, and any other relevant Invast Financial Services Pty Ltd documents before you decide
whether or not to acquire any financial products listed in this email. Our Financial Services Guide
contains details of our fees and charges. All these documents are available here on our website, or
you can call us on +612 8036 7555. CFDs and Foreign Exchange are leveraged products and carry a
high level of risk and you can lose more than your initial deposit so you should ensure CFD and
Foreign Exchange trading meets your personal circumstances.
General Advice Warning: Being general advice, this newsletter does not take account of your
objectives, financial situation or needs. Before acting on this general advice you should therefore
consider the appropriateness of the advice having regard to your situation. We recommend you
obtain financial, legal and taxation advice before making any financial investment decision.

Highlighting the Opportunities on Germany's Dax Index

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