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German Stock Market Faces Potential Challenges in Second Half of 2021, According to PwC
The German stock market is expected to face several challenges in the second half of 2021, according to PwC Germany. Recession risks, energy cost pressures, and weakening consumer purchasing power are identified as key challenges that could impact the market.
These factors, along with the ongoing energy price spikes and economic uncertainty, have disrupted trade flows and rattled financial markets, further undermining business and investor confidence. The increasing number of profit or sales warnings reflects a cautious corporate outlook amid these macroeconomic headwinds.
Despite these potential challenges, the performance of stock market newcomers paints a mixed picture. The trend towards Initial Public Offerings (IPOs) of Special Purpose Acquisition Companies (SPACs) from the US continued in the second quarter, with 468 SPAC I SE and OboTech Acquisition debuting. The Frankfurt Stock Exchange had not seen a SPAC IPO since 2010, with Lakestar being the first in the first quarter of 2021.
Notable IPOs in the second quarter included the listing of software provider SUSE, which raised around 1.1 billion euros, marking the largest IPO in the quarter. Online optician Mister Spex and wind and solar park operator Blue Elephant Energy are already in the starting blocks for their IPOs, potentially happening as early as July. At least ten more companies are working towards achieving their first listing by the end of 2021.
Carsten Stäcker, Head of Equity Advisory at PwC Germany, predicts that 2021 could be the strongest year for the German IPO market since 2000, if markets remain stable and potential challenges of the second half of the year are navigated successfully. The total capital raised by the end of June 2021 stands at 8.8 billion euros, a record level. A total of 10 IPOs took place between April and June 2021 in Frankfurt, marking the highest number since 2001.
Nadja Picard of PwC expects investors to become more cautious and selective due to the flood of IPOs in Europe and the overall disappointing IPO performance. She also anticipates significant investor caution and selectivity in the course of the year. Lab chain Synlab and online fashion retailer AboutYou also raised over 700 million euros each through their IPOs.
Although not PwC Germany predictions per se, trends such as a skilled labor shortage and structural changes in corporate investment behavior by large insurers may have also influenced market dynamics and investor sentiment during this period. Markets are currently trading at or near all-time highs, according to PwC Germany.
Many companies put their IPO plans on hold in 2020 due to the COVID-19 pandemic. However, with the market showing signs of recovery, it is expected that 2021 could be a strong year for the German IPO market, with Nadja Picard's expectation being that at least ten more IPOs are realistic in the course of the year.
[1] Source: PwC Germany [2] Source: Financial Times [3] Source: Reuters
The potential challenges in the second half of 2021, such as recession risks, energy cost pressures, and weakening consumer purchasing power, could negatively impact the German stock market, as stated by PwC Germany. Despite these challenges, the German IPO market might still experience a strong year, with PwC Germany predicting 2021 could be the strongest year for the German IPO market since 2000, assuming markets remain stable and potential challenges are navigated successfully.
