One of the weakest years ever on the stock market.

In 2008, the stock market left deep red marks on the portfolios of almost all investors. The index representing the major shares in the Eurozone, the Dow Jones EURO STOXX 50, lost 42 % of its value. Germany’s lead index, the DAX 30, was down 40 %. It started the year at 8,067 points and had fallen to 4,127 points by the end of November. It closed the year slightly up, at 4,810 points. The massive decline in share prices put an end to the nearly five-year long boom on the German stock market, during which the DAX had climbed from 2,203 points in March 2003 to an all-time high of 8,106 points in July 2007. By the end of 2008, it had returned to the level of 1998.

Turbulence on the stock markets originated from the US subprime crisis, which escalated dramatically over the course of 2008, shaking the foundations of the entire international financial sector. The collapse of the US bank Lehman Brothers in September 2008 brought the crisis to its temporary peak. Numerous financial institutions avoided failure only thanks to state rescue measures. All major industrialized nations introduced aid packages for banks in order to bolster investor confidence in the financial system. However, these measures failed to brighten sentiment on the stock markets significantly, especially since the financial market crisis has led to a worldwide recession. Economic research institutes expect that the economic output of major industrialized countries will shrink in 2009. In light of the bleak economic forecasts and the increasing amount of bad news from the corporate sector, the DAX continued its downward trend at the beginning of 2009. The index closed the month of January at 4,338 points.

RWE shares caught in downward spiral caused by the financial crisis.

RWE shares got off to a good start to the year before being affected by the general weakness on stock markets. On January 7, 2008, RWE’s common shares surpassed the 100-euro mark for the first time ever (€100.64). As the financial crisis came to a head, however, the share price dropped dramatically. By the middle of October, RWE’s common shares had fallen to their low for the year of €52.53, before making up some ground. They closed 2008 at €63.70, with RWE preferred shares ending at €53.61. This corresponds to a total return (including the dividend) of -31 % (common shares) and -32 % (preferred shares). RWE shares therefore fared better than the market as a whole and also surpassed the European sector index, the Dow Jones STOXX Utilities, which recorded a drop of 36 % in 2008.

In addition to the financial crisis, the development of prices on commodity markets also affected the performance of RWE shares. In the first half of the year, raw material prices increased considerably at the global level, leading to rising quotations on Europe’s electricity exchanges. This triggered positive share price reactions for utilities with strong generation positions such as RWE. But against the backdrop of the financial market crisis and mounting fear of recession, prices on the commodity markets have been trending steeply downwards since July. This was reflected in a substantial drop in RWE share prices. A stabilizing effect came from RWE’s solid financial position. After the turn of the year, RWE shares initially posted marginal gains, which they lost thereafter. The common shares traded at €60.87 at the end of January.

Long-term returns: RWE shares clearly outperform the DAX.

RWE‘s shares performed much better than the multi-year average of the overall market. Long-term investors who invested €10,000 in RWE ten years ago and reinvested their dividends saw their investments grow to €18,569 (common shares) or €24,816 (preferred shares) by December 31, 2008. This corresponds to an annual average return of 6.4 % and 9.5 %, respectively. In contrast, the total return posted by the DAX was slightly negative. An initial investment in the index would have decreased by 0.4 % per annum to €9,616.