Reply ‘no position’ while the job posting is still there (‘HiWi’ position in Germany)

Student assistant positions in Germany are usually open only to students enrolled at a local university (often where the position is offered, but always in Germany). This is for reasons of social insurance and labour regulation.

You are not enrolled at a local university. In fact, you are studying outside Europe.

Is it just because he think I am not good enough at the first read of my email and make a polite refusal?

Most likely, yes. Note he didn't say the position has been filled; he's only saying he can't offer you a position (perhaps because you don't meet the minimum requirements, or he doesn't think you're suited to the role, there are better candidates who've applied, etc).

This group may have a candidate in mind but forced to put an ad out for compliance.

For many temporary or contract positions, full HR process is not required and a full hiring committee is not struck: the head of the unit is the sole decider. Moreover, there might be seniority issues which guarantee the position to someone who was previously employed in this position - v.g. sessional instructor for a specific course. One is still legally obligated to advertise the position, but the playing field is tilted to favour a particular candidate. Basically, the person previously holding the position has to reapply.

This happens all the time because a contract might run over a set period, but the contract is open yearly. Maybe one needs a lab technician for the academic year but not over the summer recess. Alternatively, the lab technician who’s contract ends in April is asked to apply for a research assistant position to cover the summer months. Contract are structured this way because part-time or contract employees gets fewer benefits than full-time ones.

There are all kinds of combination possible where an internal candidate has the inside track for a position still legally required to be posted.