How Sweden Became Europe’s Leading Capital Market: Inside Look at Stockholm Stock Exchange Success

Last April, a group of twelve officials from the European Union went on a study trip to Sweden to meet representatives of Nasdaq Stockholm, the country’s successful stock exchange operator. During the two-hour session, the management of the stock exchange explained to them why so many small and medium-sized companies decided to list on the Stockholm Stock Exchange.

While European countries, including the Czech Republic, have problems attracting stock market participants and a decrease in trading volume, Sweden is characterized by successful capital markets with a number a large number of investors, and even attracting foreign companies to list.

“Sweden now has the most advanced capital markets in Europe,” he says William Wright, co-founder of the New Financial think tank. According to him, the Swedes understood that for this success it is necessary for the ecosystem to work well and 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 stocks.

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 led to 501 companies being listed in Sweden over the past ten years, more than France, Germany, the Netherlands and Spain combined.

On the Prague Stock Exchange, at the same time, there are 18 companies listed on the two main markets (Prime and Standard) and 12 on the Start market for small and medium enterprises. Several large companies, on the other hand, have withdrawn from the domestic stock market in recent years.

According to the Financial Times, Sweden’s main feature is its investment culture, which attracts a wide range of investors, from ordinary people to institutional investors. Swedish pension funds have long-term ownership of domestic shares and maintain or increase their holdings. Swedish insurance companies are also the largest owners of shares in the EU.

Similarly, many 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, and the population’s financial literacy is among the highest in the Region Europe. What is behind it? Especially the stability and long-term support of the state.

For example, as early as 1984, the government introduced the product “Allemansspar”, which allowed ordinary Swedes to invest in the stock market. By 1990, there were already 1.7 million such accounts, which helped develop funds aimed at small and medium-sized domestic enterprises.

In the 1990s, there were changes to the rules that allowed people to set aside 2.5 percent of the amount they set aside for their pensions to invest in funds of their choice.

To top it off, in 2012 Sweden introduced investment savings accounts called ISKs, which allow people to invest money without reporting their holdings or worrying about capital gains or dividend taxes. Instead, the total value of the account is taxed at approximately one percent.

Some charities go into schools to educate 16 to 18 year olds about investing by, for example, explaining the differences between shares and mutual funds. Other countries are also trying to encourage their citizens to invest in stocks. 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 intended to encourage people to secure themselves for retirement. But that’s about it. You don’t need to remind yourself what CEZ has been showing for the past year, which is very different from Sweden, who know how to pamper and improve its capital market.

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