Bang-up 400th year for investors on the Frankfurt exchange

THE Frankfurt Stock Exchange has had a great 400th-anniversary present -- a booming stock market. Prices reached a record 211.4 on the exchange's own index on June 24, up 27 percent since the start of the year. The volume of trading during the first half of the year was up 67 percent from the same period of 1984. That means more commissions for the commercial banks that conduct most of the brokerage business in this country.

Since then the stock market's index has slipped back toward 200. With the United States dollar weakening, some American investors have been selling their German corporate shares. By selling, these investors benefit both from the jump in share prices and from the increased value, in dollar terms, of the German marks obtained.

Stock prices here are much influenced by international investors, notes Dr. Michael Hamke, a stock exchange official. In fact, some 25 of the 95 member banks of the exchange are from other countries.

``We are seeing the traditional summer vacation'' on the Frankfurt exchange, commented Euan Scott, a salesman with Hoare Govett in London.

Perhaps encouraged by the favorable development of markets for secondary stocks in Paris and London, the Frankfurt Stock Exchange plans to launch in ``the next few months'' a new market for shares of companies too small or otherwise unsuitable for regular ``listing'' on the exchange.

``Legal procedures have started,'' says Dr. Hamke.

Unlike many other nations, Germany does not have a large central stock exchange and a number of other regional exchanges that play relatively minor roles. The Frankfurt Stock Exchange, although the largest in Germany, accounts for only about half the turnover. Other exchanges are in D"usseldorf, Hamburg, Munich, and West Berlin.

The Frankfurt exchange has the advantage of being situated in Germany's prime banking center. The Bundesbank, the nation's central bank, and more than 350 private financial institutions are based or represented in this city.

Its skyline is dominated by bank towers, most of them relatively new. A number of foreign brokerage firms have established offices here to coordinate their activities in Germany.

Some 240 German corporate shares are officially traded on the exchange. The number of foreign shares admitted to official trading numbers about 180, reflecting the greater interest of multinational companies to have their stocks listed in several exchanges around the world. Also, around 5,600 bonds or other fixed-interest securities are traded on the exchange.

The Frankfurt Stock Exchange got its start when several dozen merchants met in 1585 at the Autumn Fair here to agree on the value of nine coins. The Council of the City of Frankfurt supported their agreement by giving the valuation by the merchants the significance of an ``official'' rate of exchange. Much of the business in the early days of the exchange was in ``bills of exchange'' used in business transactions.

Nowadays the exchange deals in stock options and foreign exchange as well as bonds and stocks. But it has not gotten into futures trading.

Besides trading on the exchange, its member banks are free to trade shares within their own firms or over the telephone with other banks. Prices are published in an official exchange newspaper. Trading on the floor, notes Karl Oellinger, head of Commerzbank's security trading operation, which ranks as the biggest in the Frankfurt exchange, is only the ``tip of the iceberg.''

According to Dr. Hamke, nobody tracks an average price-earnings ratio for German stocks. But Mr. Oellinger, a short, lively individual, says that many shares are priced at only seven or eight times earnings. He regards such companies as Siemens, Mercedes, and his competition, Deutsche Bank, as good investments.

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