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In April of last year, a group of several dozen European Union officials went on a study mission to Sweden to meet representatives of Nasdaq Stockholm, the operator of the country’s successful stock exchange. During the two-hour session, the management of the stock exchange explained to them why so many small and medium-sized companies decide to list on the Stockholm Stock Exchange.
While European countries, including the Czech Republic, have problems attracting stock market newcomers and a decrease in trading volume, Sweden is characterized by prosperous capital markets with a large number of investors, and even attracts foreign companies to list.
“Sweden now has the most developed capital markets in Europe,” says William Wright, co-founder of the New Financial think tank. According to him, the Swedes realized that for this success it is essential to have a well-functioning ecosystem and to support it at every step.
European politicians (some) are trying to revive stock markets in their countries with various changes to the rules for stock listings or incentives for company founders. Some are also trying to support pension funds and small investors to invest in domestic shares.
But Sweden is several steps ahead. Many of the measures that other countries are now implementing were introduced there much earlier. According to data from Dealogic, this has resulted in 501 companies listing in Sweden over the past ten years, more than in France, Germany, the Netherlands and Spain combined.
Photo: List of News
In Sweden, 501 companies were listed in the last ten years.
On the Prague Stock Exchange, meanwhile, there are 18 listed companies on the two main markets (Prime and Standard) and 12 on the Start market for small and medium-sized enterprises. Several large companies, on the other hand, have withdrawn from the domestic stock market in recent years.
Investment culture
According to the Financial Times, Sweden’s key driving force is its investment culture, which attracts a wide range of investors, from ordinary people to institutional investors. Swedish pension funds own domestic shares for a long time and maintain or increase their holdings. Swedish insurance companies are also the largest holders of shares in the EU.
In the same way, multitudes of small investors reach for Swedish titles. Compared to the rest of Europe, Swedish households have the highest share of investments in listed companies and the lowest share of bank deposits, while the population’s financial literacy ranks among the highest in Europe. What is behind it? Especially the persistence and long-term support of the state.
For example, as early as 1984, the government introduced the “Allemansspar” product, which allowed ordinary Swedes to invest in the stock market. By 1990, there were already 1.7 million such accounts, which helped the development of funds aimed at domestic small and medium-sized enterprises.
In the 1990s, there were changes to the rules that allowed people to invest 2.5 percent of the amount they set aside for their pensions in funds of their choice.
To top it off, in 2012 Sweden introduced investment savings accounts called ISKs, which allow individuals to invest without having to report their holdings or worry about capital gains or dividend taxes. Instead, the total value of the account is taxed at roughly one percent.
Some charities go into schools to educate 16- to 18-year-olds about investing, for example by explaining the differences between shares and mutual funds. Other countries are also trying to encourage their citizens to invest in shares. For example, Britain recently introduced a tax break for citizens if they invest in British stocks, writes the Financial Times.
The Czech government is also trying when it launched the Long-Term Investment Product (DIP) in the new year, which is supposed to motivate people to secure themselves for retirement. But that’s about it. There is no need to remind you of what CEZ has been showing for the past year, which is in sharp contrast to Sweden, which knows how to pamper and develop its capital market.
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