The German stock market is set to reach a record high this year despite growing concerns over the eurozone's economic growth, said Tim Albrecht, fund manager at DWS.
The Dax index experienced a strong run last year, hovering below the 8,000 mark in December as its cyclical and financial names performed well in the second half of 2013.
'If we see the price earnings ratio expand from 12x, then we can expect the Dax to reach 8,400 easily this year which would be a historic high,' said Albrecht, a notch more optimistic than Allianz's Matthias Born's call for the Dax to go beyond its 2007 high.
At just over 20% in small and mid-cap names, Albrecht's DWS Deutschland fund has an overweight towards the sector. Yet he told Citywire Global he has been trimming this position as Germany's so-called Mittelstand companies, small and mid-cap firms traded on the MDax index, appear to be fully valued.
'You need to be careful with some titles. The MDax is trading at record highs at the moment,' he said.
'We've still got an overweight because we think the demand for more risk is still high. Since the beginning of the year, we have taken some profit because we think some names have got expensive.'
In the fund's top ten positions Albrecht holds car manufacturer BMW and Volkswagen. This is one sector in the German market that has seen manufacturers, including Volkswagen, face falling profits through weakening demand within Europe.
'It's not possible for Germany to completely decouple itself from the euro area. We've seen that in the automobile sector the weakness from southern Europe has made its way to the core as results in the fourth quarter were disappointing,' he said.
Albrecht added that the euro, trading at around €1.30 to the dollar, was at an optimal level for German exporters.
The DWS Deutschland fund returned 55% in the three years to the end of January. Its benchmark, the CDAX TR index, rose 41% in the same period.
The full video with Tim Albrecht will be available soon on Citywire's German language website www.citywire.de.