Germany's Bankruptcy Wave Sends Shock Ripples Through Two Key Equity ETFs

Benzinga_recent_news12-09

Germany is on course for the highest corporate insolvency count in more than a decade, raising fresh questions about the resilience of the nation’s largest listed companies — and the ETFs that track ...

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For investors in the iShares MSCI Germany ETF (NYSE:EWG) and the Global X DAX Germany ETF (NASDAQ:DAX), those stresses may soon become harder to ignore.\n       • iShares MSCI Germany Index Fund stock is trading near recent highs. What’s next for EWG stock?\nCreditreform predicts that about 23,900 German companies will go bankrupt in 2025, an increase of 8.3% over last year and the most since 2014. The pace of deterioration has slowed, but the report marks a second successive year of economic contraction, rising costs, and shrinking access to credit.\nSmall and micro-enterprises, those with 10 employees or fewer, account for over 80% of all insolvency cases, emphasizing the vulnerability of Germany's SME backbone. While individually small, these firms supply, support and service many of the country's largest public companies.\nThis makes the insolvency spike relevant for ETF investors, as ripple effects-such as supply-chain delays, payment defaults and tighter credit conditions — can ultimately influence the performance of large-cap constituents inside both EWG and DAX.\nAlso Read: German Economy Is In ‘Free Fall’ From Self-Inflicted Policies\nAlthough the ETFs track different indices, they together provide a comprehensive view of the sentiment towards German equities.\nThe EWG tracks the MSCI Germany Index and provides broad exposure to industrials, financials, autos, health care and consumer-oriented names. Those areas tend to feel the effects of domestic economic weakness more directly, making the fund particularly sensitive to rising bankruptcies and sluggish business activity.\nBy contrast, DAX, which tracks Germany’s flagship blue-chip index DAX (Deutscher Aktienindex), is more concentrated in multinational heavyweights. These firms benefit from global revenue streams, but are not immune from homegrown pressures, including high labor costs, energy burdens and softening domestic demand.\nWith corporate and consumer finances both weakening, the macro backdrop for the two leading Germany-focused ETFs is unfavorable.\nFinancial stress in Germany is not confined to companies. \nPrivate bankruptcies are set to increase by 6.5% in 2025, reaching their highest level since 2016, buoyed by over-indebted households, as well as a wave of job cuts and increasing unemployment.\nFor those ETFs that have exposure to banks, consumer discretionary names and domestic industrials, the pressure on households may further weigh down earnings expectations.\nCreditreform warns of Germany losing its competitiveness, weighed down by high costs, bureaucracy and persistent economic weakness. With no quick turnaround on the horizon, the investors in both EWG and DAX are facing a market increasingly shaped by insolvency risks, both corporate and consumer. \nRead Next: \nPhoot: ImageFlow via Shutterstock","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"-1","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0,"need_auth":false,"code":"91000000","status":"200"},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.35.12","shortVersion":"4.35.12","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2590350666","isCrawlerRequest":true}