The OMX stock exchange in Sweden wants to expand its business. Eight Nordic and Baltic stock exchanges are already operating jointly in the Norex network. In 2003, the Helsinki stock exchange merged with stock exchanges in Estonia, Lithuania, and Latvia, and the Copenhagen stock exchange will also be merged by the end of this quarter. “Oslo remains a hard nut to crack,” says Israel Minister Economic Affairs to Sweden, Finland and Norway Mordechai Ish-Shalom. Ish-Shalom is a former deputy director general for economics and planning division at the Ministry of Industry, Trade, and Labor.
Since taking up his new position, he has tried to increase activity by Israeli companies in Sweden. In May, the Manufacturers Association of Israel managing director will head a delegation on a visit to the stock exchange, and Ish-Shalom is urging Israeli companies to issue shares there. “Eight Nordic stock exchanges six that have merged, plus those in Iceland and Norway - are connected online to the Norex network, which enables about 80 Nordic brokers to trade simultaneously on all these exchanges. Concerns such as Merrill Lynch and Morgan Stanley in London, and Deutsche Bank, Dresdner Kleinworth Benson, and Commerzbank in Frankfurt are members of the network. The aggregate worth of all companies listed on the Norex network is greater than that of companies traded on the stock exchanges in Switzerland, Italy, and Spain put together,” he claimed.
Double taxation convention
OMX is the third largest stock exchange in Europe in options trading, and also conducts transactions in shares, bonds, and their derivatives. The aggregate value of the approximately 300 companies traded on OMX, including 20 foreign companies, was $400 billion in 2004, 17% more than in 2003. OMX is very liquid about $2 billion changes hands per day. The main OMX listing accounts for 90% of the stock exchange’s trading volume, and 15% of its trading volume is conducted online.
OMX’s international activity is extensive 34% of the value of its shares is held by foreigners. Sweden has signed conventions to prevent double taxation with more than 70 countries, including Israel. Foreign investors are therefore exempt from tax on dividends. About ten brokers have foreign ownership. Foreigners own 20% of the OMX company, with the rest in the hands of local pension and mutual funds and insurance companies.
OMX has a technological subsidiary for computerization and automation of stock exchange activity, and a high-quality system for trade in options. OMX competes with giants like Euronext, Accenture (NYSE: ACN), and IBM (NYSE: IBM).
Rapid growth
Positive macroeconomic data in the Swedish and Nordic and Baltic economies are likely to constitute a significant attraction for the exchange. Per capita GDP in Sweden is $40,000, and the aggregate GDP of Nordic and Baltic countries is over $1.1 trillion, spread over population of 25 million.
"Globes": Why is it worthwhile for Israeli companies to hold issues on OMX?
Ish-Shalom: ”The Swedish economy is saturated with money looking for attractive investment alternatives, given the low interest rate in the market, and the recession in real estate, especially commercial real estate. Shares once considered as safe as bonds, such as Ericsson (Nasdaq: ERICY; SX: ERIC) and ABB (NYSE, SAX, DAX: ABB; SWX: ABBZ; LSE: ANN), have lost large percentages of their value. The Swedish economy has been growing two to four times as fast as the euro bloc economies in recent years. Income of households, pension funds, and insurance companies has been rising continuously, and is being channeled overseas, or to new companies on the stock exchange. This problem is shared by all Nordic and Baltic economies.”
For whom is an OMX issue suitable?
”For established Israeli companies interested in dual listing under an abbreviated procedure; companies exporting to the Nordic and Baltic market that are interested in exposure to the investment community there, and in using an issue as a marketing tool; high-tech start-ups (65% of exports to Sweden are high-tech); and venture capital funds with companies suitable for issues.”
In recent months, there are signs that investors in both countries are awakening. Together with Accel Partners, Jerusalem Venture Partners invested $12.5 million in Swedish software company QlikTech International. Private Swedish investors invested $5 million in Israeli company ApNano. Gazit-Globe (TASE: GLOB) took over a Finnish real estate company through the stock exchange.
A story that put OMX in the headlines in 2000, at least in European financial newspaper sections, began with an intentional British leak, which said that OMX had made an offer to buy the London Stock Exchange (LSE) at a higher price than the German bid. It was learned that OMX’s market value was three times that of the LSE. In any case, the Scandinavian attempt to take over London, together with Frankfurt, was headed off. For reasons of prestige and national honor, and natural opposition on the part of small brokers, the deal to sell the LSE to the Swedish bidder never went through. The LSE streamlined, underwent a technological revolution, reduced the power of the small brokers, and appointed a new chief executive, Clara Furse. Despite their formerly stormy relations, OMX and LSE are partners in the EDX exchange in London, which specializes in derivatives.
Published by Globes [online], Israel business news - www.globes.co.il - on March 15, 2005