German stocks seen down in 2008, but off current lows

By Peter Starck

FRANKFURT (Reuters) - Forecasts of where Germany's DAX share index .GDAXI will be by the end of the year have come down sharply in the last three months, the latest Reuters poll of equity strategists shows.

But as the DAX has fallen in step with other major share market indexes, investors who enter now could see gains of around 25 percent by year-end, according to the poll.

The median of 22 forecasts, collected over the period March 10-14, is for the DAX to be at 7,700 points at the end of 2008, a loss of 4.5 percent over the year and down from a forecast of 8,500 points given in the previous poll taken in December.

The latest forecasts were given before JPMorgan Chase moved to acquire stricken investment bank Bear Stearns at the weekend and the U.S. Federal Reserve's decision to lend directly to securities firms for the first time since the Great Depression.

The DAX, which includes Deutsche Bank (DB1Gn.DE: Quote, Profile, Research, Stock Buzz), engineering conglomerate Siemens (SIEGn.DE: Quote, Profile, Research, Stock Buzz), power utility E.ON (EONG.DE: Quote, Profile, Research, Stock Buzz) and drugs and chemicals group Bayer (BAYG.DE: Quote, Profile, Research, Stock Buzz) as well as carmakers Daimler (DAIGn.DE: Quote, Profile, Research, Stock Buzz), BMW (BMWG.DE: Quote, Profile, Research, Stock Buzz) and Volkswagen (VOWG.DE: Quote, Profile, Research, Stock Buzz), closed at 6,182 points on Monday.

DZ Bank analyst Christian Kahler wrote in a strategy note that the ongoing credit crisis, high prices of commodities such as oil, the appreciation of the euro and fears of a recession in the United States were taking their toll on stock markets.

Such risk factors "are likely to limit the German equity market's recovery potential", said Kahler, who last week lowered his DAX forecast to 7,600 from 8,300 points by end-2008.

The poll's median forecast put the DAX at 6,600 points by the end of June this year, with individual forecasts ranging widely from 5,650 to 8,000 points.