“How Sweden’s stock market became the envy of Europe” is the title of an interesting article published by the FT today. Many small and medium-sized businesses are deciding to list in Stockholm. With 501 IPOs in the last ten years “the Nordic country has been highly successful at encouraging smaller domestic businesses to stay at home, encouraged by the depth of its stock market” according to the article and “A key driver has been the country’s investment culture, which Carnegie’s Elofsson says has attracted ‘everyone from the man on the street to very engaged private banking investors, entrepreneurs, but also the small and mid-cap investment community’”.
Compare that with the UK where AIM listings have been falling and the main market has failed to attract new listings – larger companies such as Shell are looking to move to the USA instead which they perceive has a more vibrant equity culture, better share valuations and more liquidity.
Swedish insurance companies have big equity holdings while in the UK insurance companies and pension funds have been reducing their equity holdings, particularly in UK companies.
Another quote from the article: “Compared with the rest of Europe, Swedish households hold among the highest proportion of their investments in listed companies and among the lowest in bank deposit holdings, while financial literacy is greater than in Germany, France or Spain. In 1984, the government introduced Allemansspar, a product enabling ordinary Swedes to invest in stock markets. By 1990 there were already 1.7mn of these accounts, helping drive the launch of domestically focused small and mid-cap funds”.
Education about financial markets in schools seems to be one reason for the vibrancy of equity investment in Sweden, while UK schools seem to be spending a lot of time on education on gender differences, black history and eco issues.
Having worked for a Swedish company for a couple of years I would comment that the business culture is somewhat different. The UK AIM market is full of companies whose management I would not trust, while that is a key attribute of any successful stock market investment. Cleaning up the AIM market is a prerequisite if more IPOs of small and mid-cap companies are to happen. There are still too many dubious IPOs in the UK – companies that list at optimistic prices and quickly run into difficulties – such as Dr Martens. The promoters of such businesses are part of the problem. Too many people looking for a quick return.
Anyone who is interested in improving the UK stock markets should read the FT article.
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
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