German and European investors have been buying global equities (with a dual listing on Frankfurt and German stock exchanges) in record numbers in 2021.
Over 8,000 global companies with a primary listing on an exchange such as NASDAQ, TSX, ASX and LSX have chosen to dual list on Frankfurt Stock Exchange and other German Trading Exchanges.
Sectors running white hot are battery metals, critical raw materials, and clean energy/tech.
Below we examine the various sectors that have really taken off in Germany for European investors in 2021.
Companies with a strategic interest to European Union
If a company is operating in an area that is of major strategic interest to the European Union this will result in retail, family office and smaller institutional investors analysing the sector and following relevant listings closely.
The areas of major strategic interest to the European Union are battery minerals and metals (lithium, graphite, nickel, cobalt, magnesium, rare-earths), clean-energy technology (Hydrogen, carbon capture technologies and renewable energy), critical raw materials and recycling technologies. Most companies in these sectors with a dual listing in Germany will have seen an increase in retail trading volume during 2021.
Some examples of this include European Metals Holdings (ASX: EMH; FSE; E86) which is developing the largest hard-rock lithium deposit in Europe in the Cinovec region in the Czech Republic. This deposit is a major strategic interest to the European Union and as gathered significant press coverage here plus material investor engagement. Another is Volt Resources (ASX: VRC; FSE: R8L) developing a vertically integrated downstream graphite production with operations in Ukraine and Tanzania. This company is receiving very strong DACH region investor engagement.
What is interesting is European investors are embracing companies where operations may be outside Europe, but the product or service is still of significant interest to Europe. An example is Latrobe Magnesium (ASX: LMG; FSE: L2Q). LMG is an Australian based company developing a demonstration plant in Australia to produce magnesium metal from fly ash – a waste by-product of brown coal power stations. The company has been seeing strong trading on Germany’s Tradegate exchange as investors likely envisage European strategic growth for the business in countries such as Poland (with the largest coal-fired power plant in Europe, emitting more than 30 million tonnes of CO2 a year).
Clean energy and clean energy technology
Germany is spending big on Hydrogen and clean energy technology. The ‘package for the future’ makes available €7 billion for the roll out of hydrogen technology in Germany and another €2 billion for developing international partnerships. Investor interest in dual-listed Hydrogen stocks has intensified in 2021 with companies such as Hazer Group (ASX: HZR; 2H8) and Global Energy Ventures (ASX: GEV; FSE: WS9) seeing solid volume in Europe.
Companies in the clean-technology space have also seen volumes increase in 2021. An example is ClearVue Technologies (ASX: CPV; FSE: CKJ). ClearVue is an Australian based company developing and commercialising Photovoltaic (BPIV) glass technology to generate renewable electricity and reduce the carbon-footprint of buildings. ClearVue has been gathering investor attention in Europe, especially with the Green Deal. Buildings are the single largest energy consumer in Europe using 40% of energy and generating 36% of greenhouse gas emissions.
The EU commission has proposed that as of 2030 all new buildings must be zero-emission and consume little net energy, be powered by renewables, and emit no on-site carbon emissions from fossil fuels. This provides enormous opportunities for companies such as ClearVue in Europe and investors are watching the sector closely.
A company has a strategic asset, joint-venture, distributorship, or relationship in Europe
If a company has a strategic interest in Europe such as joint-venture, collaboration, distributorship, or commercial operations this will also increase the interest of European investors.
An example is ASX listed Neometals Ltd and their German joint venture with SMS Group GmbH (“Primobius”) to develop and commercialise sustainable recycling for lithium-ion batteries. The joint venture has received solid news coverage in Germany, and this significantly increases the awareness of (and trading in) Neometals Ltd dual-listed shares.
Neometals shares have gained over 400% in 2021 as investors appreciate the global importance of battery recycling to EV industry and circular economy. The sustainable and zero-carbon emission process has been 5 years in development. On 26 October 2021 the company announced the showcase demonstration plant at Hilchenbach, Germany was fully commissioned and will have a 1,000 tpa capacity. There is scope for a 200,000-tonne plant, where stage one can be situated close to end-of-life batteries deposits (such as OEMs and car makers) and the refining plant can be situated close to renewable energy sources, key reagents, and customers.
Another example is ASX listed Antisense Therapeutics Limited (ASX: ANP; FSE: AWY) which is developing and commercialising antisense pharmaceuticals for children impacted by Duchenne Muscular Dystrophy (DMD). Antisense will be conducting Phase IIb/III trials in Europe in 2022 and this is also of significant interest for European investors.
The huge impact German based BioNTech SE has made to COVID-19 has significantly increased European interest in quality biotech shares and it is expected dual-listed biotech companies in clinical trial development will continue to see strong trading in Europe.
Regenerative agriculture and ag tech
Regenerative agriculture and ag tech are big news in Europe. The EU Green Deal is a growth strategy that aims to transform the EU into a prosperous, fair, competitive and resource efficient economy and with no net emissions of greenhouse gases by 2050.
A central plank of the EU Green Deal is the need to shift to a more sustainable system of agriculture that minimises the environmental footprint and enhances and protects the natural environment. Regenerative agriculture, agtech and climate-smart agricultural practices are areas receiving significant investor and stakeholder attention in Europe.
On the Frankfurt Stock Exchange an example is ASX listed Wide Open Agriculture (ASX: WOA; FSE: 2WO). The company has a large Dutch shareholder base including Commonland Foundation with 13% of the registry. Wide Open Agriculture is developing a global strategy with plant-based food and carbon-neutral oat milk, and this resonates strongly with European impact and ESG investors.
A company may be seeking to establish commercial operations in Germany or Europe. In this case a dual listing indicates commitment, engagement, and presence. Examples include medicinal cannabis companies or clean-energy companies.
AI, AR/VR and Med-tech
This sector is also in demand in Europe where quality small-mid cap listings in the sector are in short supply. German has a strong AR/VR start-up scene but for investors most of these companies are privately held or owned by venture capital.
One of the strongest companies with a dual-listing on Frankfurt Stock Exchange has been Brainchip Holdings (ASX: BRN; FSE: 24Y) with over 9 million shares traded on Tradegate alone on 13 January 2022. European investors have responded favourably to the California-based company's announcement of a deal with Mercedes. The neuromorphic computing chip is a form of information processing whose hardware runs so-called spiking neural networks. The technology makes the “Hey, Mercedes” voice control system in the EQXX five to ten times more efficient than conventional voice control.
AR/VR is expected to be transformational for Europe in sectors such as manufacturing, automotive, engineering and healthcare. Europe is expected to play a significant role and listed small-mid cap companies in the sector should consider dual-listing in Germany and engaging with European investor and stakeholders.
Medicinal Cannabis and hemp stocks
Retail and sophisticated investors in Germany are increasingly interested in companies in the medicinal cannabis sector. Germany will lead the European medicinal cannabis market and over 1 million German patients will have access to medicinal cannabis by 2024 and the sector is expected to be worth over €7 billion by 2028.
There is a lack of companies on Frankfurt Stock Exchange with a primary listing on the exchange (domiciled in Germany or German reporting compliance) in medicinal cannabis so dual-listed companies are evaluated closely. There are many sophisticated investors in Europe and the UK looking for quality ASX/TSX/NASDAQ medicinal cannabis companies to invest.
TSX medicinal companies all trading strongly in Germany include Canopy Growth (TSX: WEED; FSE: 11L1), Aurora Cannabis (TSX: ACB; FSE: 21P1) and Hexo Corp (TSX: HEXO; FSE: 74HA) all have strong European investor engagement.
Surge in retail investing in Germany
The DACH region (German speaking countries of Germany, Austria, and Switzerland) have seen a significant increase in retail trading since COVID-19 impacted global markets.
In 2020 about 12.4 million people are involved in the stock market – an increase of 2.7 million from 2019.This represents over 17% of the German population aged over 14. There are strong tailwinds to suggest the increase of interest in equites in Europe will continue with the rise of neo-brokers such as Trade Republic (with easy-to-use smart phone applications), younger investors being less risk-averse, low transaction costs, growth of ESG and Impact investing, and German companies such as BioNTech creating strong interest in companies and investing.
For companies in the high-impact sectors in Europe such as ev-metals (lithium, graphite, and nickel), hydrogen, clean energy, technology, biotech, and clean technology investor interest should continue to build in 2022.