Monday, October 6, 2008

German Stocks Fall to Lowest Since 2006; Hypo Real Estate Drops

Oct. 6 -- German stocks fell the most in eight months, sending the DAX Index to the lowest since July 2006, as the deepening credit crunch forced the country's financial industry to double a credit line for Hypo Real Estate Holding AG and the government to guarantee personal savings accounts.

Hypo Real Estate, the nation's second-biggest commercial- property lender, tumbled 40 percent as the government and the country's banks and insurers agreed on a 50 billion-euro ($68 billion) rescue package after an earlier bailout faltered. Deutsche Postbank AG, the country's biggest consumer lender by customers, declined 5.2 percent and Allianz SE lost 7.9 percent.

The benchmark DAX Index dropped 4.9 percent to 5,511.32 as of 10:58 a.m. in Frankfurt, the steepest intraday slide since Jan. 23, as all 30 stocks in the index except for Volkswagen AG retreated. The HDAX Index of the country's 110 biggest companies slid 5.1 percent to 2,765.36.

``No more meaningful predictions can be made about capital markets,'' Thomas Koerfgen, a managing director at SEB Asset Management in Frankfurt, said in a Bloomberg Television interview. ``We have a crisis of trust.''

The DAX has slumped 32 percent this year as credit losses and asset writedowns sparked by the U.S. subprime-mortgage crisis topped $585 billion worldwide and pushed the global economy toward a recession. The German economy, Europe's largest, contracted for the first time in almost four years in the second quarter as demand for exports slowed.

Credit Line

Hypo Real Estate dropped 40 percent to 4.53 euros. Germany's financial industry agreed to double a credit line for the company to 30 billion euros, said Torsten Albig, a spokesman for Finance Minister Peer Steinbrueck. The federal government's guarantee for the credit line remains unchanged, Albig said.

The government met with banks and insurers in Berlin all day yesterday to discuss a revamped rescue package after private banks on Saturday withdrew their support for a 35 billion-euro rescue package brokered a week ago.

Deutsche Postbank lost 5.2 percent to 30.80 euros. Allianz, Europe's biggest insurer, lost 7.9 percent to 91.27 euros.

Chancellor Angela Merkel said the government will guarantee personal savings for account holders. Consumer deposits, including the accounts of small, privately held businesses which make up the backbone of Germany's economy, added up to 568 billion euros at the end of 2007, Finance Ministry spokesman Torsten Albig said in a telephone interview.

``Merkel had to do this to avoid panic account transfers,'' Otto Bernhardt, finance spokesman in parliament for Merkel's Christian Democrats, said in an interview.

The following stocks also rose or fell in German markets. Symbols are in parentheses.

Daimler AG (DAI GY) retreated 8.6 percent to 29.11 euros and Bayerische Motoren Werke AG (BMW GY) lost 4.6 percent to 24.685 euros. Exane BNP Paribas analysts reduced their earnings estimates for European auto companies by an average of 10 percent this year and 14 percent next year and advised clients to ``stay away from the sector'' until managements start providing ``more realistic forecasts.''

BMW and Daimler are the world's largest makers of luxury cars. MAN AG (MAN GY), Europe's third-biggest truckmaker, dropped 4.4 percent to 42.02 euros. Continental AG (CON GY), the region's second-largest car-parts maker, slid 4.4 percent to 49.25 euros.

Infineon Technologies AG (IFX GY) declined 5.6 percent to 3.885 euros. UBS AG reduced its share-price forecast for Europe's second-biggest maker of semiconductors to 6.30 euros from 7.30, saying weaker demand in its automotive and wireless businesses will reduce earnings.

K+S AG (SDF GY) dropped 8.2 percent to 40 euros. WestLB AG lowered its recommendation for Europe's largest producer of potash used in fertilizers to ``reduce'' from ``buy,'' saying investor concern that agricultural commodities won't rally and weaker demand for fertilizers will weigh on the shares.

Corn, wheat, rice and soybean futures fell at least 2.7 percent today.

Premiere AG (PRE GY) slid 17 percent to 3.83 euros, following a 50 percent slump on Oct. 3. Brokerages including Goldman Sachs Group Inc. and UBS lowered their share-price estimates for Premiere after the German pay-television company partly owned by News Corp. forecast a 2008 loss and said its chief financial officer quit.

ThyssenKrupp AG (TKA GY) dropped 8.8 percent to 18.78 euros. UBS analysts reduced their earnings estimates for Germany's largest steelmaker by 20 percent in fiscal 2009 and 21 percent in 2010, saying recessions next year in the U.S. and Europe will cause steel prices to fall faster than they previously expected. The brokerage cut its share-price projection to 35 euros from 60.

Salzgitter AG (SZG GY) slid 8.9 percent to 61.71 euros as UBS lowered its share-price forecast for Germany's second-biggest steelmaker to 95 euros from 145. Kloeckner & Co. SE (KCO GY) lost 8.5 percent to 13.42 euros. UBS cut its price prediction to 25 euros from 50.

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