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The Equity-Loving Country: An Insight

Vontobel Markets
7 Jun 2024 | 3 min read

Sweden stands out in terms of interest in equities, at least from a European perspective. A mix of popular but globally leading companies, shareholder-friendly regulations and low taxes has taken stock market interest to an all-time high in the last decade. With regards to Sweden's national day, we have a look at the Swedish stock market and how it compares to our European neighbors, join us!

The country from the north

Investors, both Swedish and foreign, have not missed the strong historic performance of the Swedish stock market. Our beloved OMXS30 index has outperformed most of its European peers, not least the giant Germany and broad Europe, almost regardless of the time horizon. Our entrepreneurial spirit and company culture have made the stock market flourish. Sweden is one of the countries with the most listed companies per capita, and the IPO market continues to provide innovative companies with capital year after year. The historical returns and positive attitude towards the stock market from market participants undeniably make us an equity loving country.

The OMX is trading near all-time highs and is at unexplored heights. The index is currently above both the 200 and 50 moving averages, both of which are tilting upwards. A positive trend to say the least.

The sectors that make up the Swedish stock market do not make us unique; Sweden is similar to the rest of Europe in this respect. Industry and finance characterize both the Swedish and European markets, but (at the risk of bias) there is a certain tendency towards higher quality among Swedish companies. With world-leading industrial companies such as Atlas Copco, Volvo and ABB at the forefront, it is difficult to argue against this. There is nothing wrong with our financial companies either; SEB's remarkably low cost/income ratio and Handelsbanken's credit rating, which is among the best in the world, are even internationally recognized.

The OMXS30 index consisted of the following companies with their respective weightings as of 31 May.

A perfect storm

But how did we become such equity-oriented people? Well, there are several reasons. Much of it probably lies in the regulations that Swedish politicians have developed to make it easier for retail investors to invest. The "allemanssparande" scheme of the 1980s aimed to make saving easier, while creating incentives for people to put money aside with a more favorable tax arrangement. In 2012, investing was further simplified with the launch of the investment savings account (ISK), with lower taxes and simplified tax filings, among other things.

Sharholder clubs such as Aktiespararna and business magazines such as DI and Affärsvärlden have also helped to fuel interest in shares. However, one of the most important factors may be our earlier adoption of the internet and the launch of online brokers at the turn of the millennium. Brokers like Avanza allowed people to trade shares conveniently and cost-effectively from home instead of calling or going to the bank. Growth has accelerated over the past decade and stock trading has become mainstream, with the number of Swedish customers of online brokers Avanza and Nordnet quadrupling between 2014-2023.

A relative winner

As mentioned earlier, the Swedish stock market is performing strongly against its European counterparts. Investors in Swedish equities and index funds have historically enjoyed a good journey. But how big of a winner are we? Of course, it depends on the horizon you look at, but on the longer horizons, the Swedish stock market is at the top of Europe. The performance over 15 years with dividends reinvested and calculated in USD is hot on the heels of Switzerland, with only Denmark and the Netherlands being the "developed" European economies noticeably ahead of us.

Looking over a five-year horizon, performance remains good, but does not stand out as much. Eastern Europe's overrepresentation among the top performers in Europe is noteworthy. Looking at the developed economies, Sweden is still in the top 5 and significantly ahead of Europe's largest economy, Germany. Not a bad historical return!

 

Happy National Day!

Although many things can feel tough in these economic and geopolitical times, there are certainly reasons to be proud of Sweden in general and our stock market in particular. We Swedes are equity orientated people like no other, and we have a well-functioning stock market with good historical performance that stands strong in Europe. With that said, we wish you a very happy National Day!

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