Germans bitten by bourse bug

Sitting in a backroom of a cellar restaurant in the sleepy town of Kelkheim near Frankfurt, seven Germans face a difficult decision: how to deal with an investment located thousands of kilometres away in Australia?

Trawling through charts and analysts' reports from the internet, members of the share investment club Positron are trying to decide whether to buy or sell their shares in Australian mining firm Consolidated Minerals.

At monthly meetings at a local restaurant, the retail investors - laboratory assistants, computer experts and bankers - decide how to spend and when to cut and run.

"It is quite difficult to get financial data and news on overseas firms," club founder Thomas Laufer told his perplexed members.

Share investment clubs, the first of which was formed in the US in 1898, are becoming more popular in Europe's largest economy. Experts say this is a sign that Germans, finally, may be warming up to equity investments.

"We are receiving many requests from people interested in joining such a club," said Marc Tuengler at Germany's biggest shareholder association, DSW.

Germany may be a global player in technology or car manufacturing but Germans still have a long way to go when it comes to share investments - 75 per cent of households do not know what a mutual fund is, industry data shows.

"We've never had a culture of investing in shares," said Wolfgang Gerke, a professor for business at the University of Nuremberg-Erlangen. "But things seem to be changing slowly."

Since a recent rally on the Frankfurt sharemarket sent the blue-chip DAX index to a 4-year high this month, more Germans are gearing up to invest in equities.

Unlike in other European countries and the US where equities are popular, Germans have long preferred the perceived havens of bonds, property or cash. Analysts blame the disastrous economic consequences of World War II when millions lost everything, after already suffering hyperinflation, recession and the 1929 bourse crash.

While pension systems elsewhere in Europe have opened up for more share investments, the retirement plans of most Germans still shun stocks.

"And if people do buy funds, take a look at what they often opt for: bonds or cash," said Birgit Willberger, who founded Germany's first investment club for women, called Ladyinvest.

The 1996 flotation of former state phone company Deutsche Telekom fuelled a general interest in stocks. Helped by a huge marketing campaign, the stock, dubbed "Volksaktie" (people's share), was the first share ever bought by so many retail investors.

But many were hit when technology stocks plunged after the internet bubble burst in 2000.

Some had put all their money in a few stocks, such as media firm EM.TV - once worth more than German airline Lufthansa - which lost 90 per cent of value within weeks in 2000 after a series of profit warnings.

And with the growing appetite for stocks, some experts fear Germans are about to make the same mistakes again.

Laufer's crew decide to keep their shares in the Australian firm as well as invest in industrial or banking stocks.

- REUTERS