The inclusion of Rheinmetall in the EuroStoxx 50, replacing Kering, is a significant development for the European stock market and has far-reaching implications for investors, index funds, and the companies involved.
Background of the Index Change
Rheinmetall, a leading German defense contractor, will replace the French luxury goods manufacturer Kering in the EuroStoxx 50 starting June 20, 2025. This change was decided after a review of market capitalization based on the closing prices of May.
Reasons for the Change
- Stock Price Development: Rheinmetall has experienced exceptional growth since the beginning of the Russian invasion of Ukraine in February 2022. Its market capitalization increased more than twentyfold to over 80 billion euros. In 2025 alone, the stock surged by around 200 percent.
- Changed Investor Preferences: The increased demand for defense technology due to geopolitical tensions and rising military expenditures in Europe is driving Rheinmetall’s business.
- Weakness at Kering: Kering has been suffering from ongoing weakness in its core market, Gucci, leading to a decline in its stock price. The current market capitalization is only around 20 billion euros.
Significance for Investors
- Index Replication: For ETFs and other funds that physically replicate the EuroStoxx 50, this means restructuring their portfolios. They will need to buy shares of Rheinmetall and sell shares of Kering, which can create additional short-term demand for Rheinmetall securities.
- Liquidity Effects: The change may lead to increased volatility in both stocks as large quantities are traded.
- Signal Effect: The rise of a defense company in one of the key European indices reflects a structural shift – away from the consumer goods sector towards the defense industry.
Timeline
The changes will officially take effect on Friday evening after the market close on June 20, 2025.
Summary Assessment
The switch not only underscores the changed economic priorities in Europe amidst geopolitical uncertainties, but also the dynamics of individual sectors within the financial market. For investors, this is an important signal: sectors with strong growth potential can establish or expand their positions through such index adjustments in the long term.