Sweden leading the way as a European SME investment hub

By: Ed Knight, Vice Chairman, Nasdaq Inc. Oct 2021

In Sweden, small- and medium-sized enterprises (SMEs) have enjoyed a strong financial ecosystem that’s enabled growth for almost a century; from the 20th century post-war era – which saw the birth of some of today´s most successful companies in their respective industries, such as Volvo, IKEA and Ericsson – to today´s age of technology where a flourishing startup scene has created some of Europe´s most successful new businesses, including Klarna and Spotify.

Sweden has since the early years of this millennium been able to position itself as one of the most important growth hubs in Europe, enabling both Nordic and international entrepreneurs to access growth capital to develop and expand their businesses.

Nasdaq, as the main market operator in the Nordic and Baltic region, has since 2016 seen 400+ companies list on one of its trading platforms, the main market, and its growth market First North. Despite the challenging global economic situation in the wake of the Covid-19 pandemic, 122 companies listed in Sweden alone during 2020 and the first half of 2021, making it a leading European hub for SME listings.

Several factors interplay to enable this development, but maybe the most important is the vibrant and well-functioning ecosystem, with advisers facilitating the listing process and a range of investors supporting the market, from institutional capital to active retail investors.

Top of the rankings

The Swedish equity market is characterised by active trading, also in SME shares, and broad access for many investor types. As in many other places, in recent years the participation of retail investors in the Swedish market has increased steadily from already high levels. In fact, according to reports from the European Market Regulator ESMA, Sweden alone accounts for more than 40% of European SME trading volumes (UK pre-Brexit trading volumes included) and retail investor participation is an important factor in this.

For investors and issuers alike, increased retail trading has its benefits. Sweden and its Nordic neighbours come out on top of national rankings in terms of annual share returns over the last 50 years, and the high level of interest in investing in both smaller and large companies has made it possible for issuers to continuously raise capital through secondary market offerings. This capital has enabled companies to continue their growth journey and contribute positively to growth and employment.

The inflow of new and sometimes less experienced market participants also brings with it some challenges, and Nasdaq has seen a rise in attempted market manipulation in recent years.

The European Commission has made financial literacy one component of their Capital Market Union action plan, believing sound financial literacy is at the heart of people’s financial well-being. In Sweden, where retail participation has been high for many years, there have been several recent initiatives to support increased financial literacy.

  • The association for young stock savers (Unga aktiesparare), an independent non-profit association founded in 1990 with the purpose of educating and inspiring young people in financial literacy and investments by arranging training, literature, events and outreaching to schools.
  • Like your finances (Gilla din ekonomi) is Sweden’s national network for financial education, established in 2010. The network consists of authorities, organisations and financial firms that share the objective of improving consumers' understanding of their personal finances by sharing knowledge through various informational and education projects. The network has more than 90 members. Activities in the network are carried out by the Programme Council’s Office and different task groups for individual educational projects. Sweden's financial supervisory authority coordinates the network.
  • Swedsec (SwedSec Licensiering AB), a subsidiary of the Swedish Securities Markets Association, has since 2001 been providing a licencing programme for employees within the Swedish financial market with the purpose of maintaining confidence in the Swedish financial market.

Nasdaq supports these and other local initiatives in the European countries that that we operate in, and share the Commission’s view that financial literacy is an essential skill for effective decision-making about personal finances.

With one of the strongest equity cultures in the world, Sweden serves as a unique breeding ground for SMEs to prosper, and for both large and small investors to join those growth journeys at an early stage.

As the leading exchange operator in the Nordic region, Nasdaq can both contribute to this ecosystem, and also learn from it and apply that knowledge to markets in need of a better environment for smaller market participants.