To the untutored Western European eye, images of the Nordic countries are typically limited to the novelty of bicycling monarchs and Scandinavian representatives in the toe-curling TV ritual that is the annual Eurovision Song Contest. But IROs from Norway, Sweden, Denmark and Finland are busy generating a useful reputation for their region in the field of investor relations.
As well as enjoying some of the highest standards of living in the world, the Scandinavian nations are home to some of the most developed equity markets in Europe. This is despite the Nordic countries being some of the smallest in Europe in terms of population; just 23 mn people live in the four nations, with the largest, Sweden, boasting a spartan 9 mn. “You can say that the UK markets lead Europe, but Sweden and Finland are not too far behind,” says Olli Virtanen of Virtanen Associates, a Helsinki-based communications consultancy. “Unlike in countries like France and Germany, people here have no prejudices against the capital markets,” he explains. Share ownership levels comfortably beat Western European nations, with over 50 percent of Swedes holding stock market investments.
But though the Nordic capital markets are well developed, Norway and Denmark lag behind their neighbors. “The Oslo Stock Exchange is much smaller than the other Nordic markets and it also has lower growth, because it contains more companies from the basic industries and has a relative overload of small caps,” explains Mari Thjomoe, vice president of investor relations at Statoil, the Norwegian oil company. It’s a similar story in Denmark. “There are about 300 companies on the Copenhagen Stock Exchange, double the number listed in Stockholm. But many of them are small companies so we have fewer foreign investors,” says Steen Juul Jensen, divisional director of corporate communications and investor relations at Danish pharmaceuticals group Lundbeck.
The development of the Nordic capital markets is credited by many with firing the growth of investor relations in the region. “IR has moved like the stock markets,” claims Pia Irell, Nordic IR manager for Swedish group ABB and chairman of the Swedish Investor Relations Association (Sira). “IR grows like the markets grow.”
Others point to the growing numbers of international investors in the Scandinavian markets, who are pushing along the development of IR, especially among the large companies that have outgrown the limited confines of the local markets. “The big companies here have had IR officers for some time now. I think that investor relations here tends to be more active than in other countries because they need to be more active,” says Statoil’s Thjomoe.
International focus
Scandinavia is home to some of the most international companies ever to grace the equity markets. Driven by a need to escape the confines of the local markets, firms such as Nokia, Ericsson, ABB and Volvo now have investors all over the world. Ericsson’s IR department not only caters for its listings in Stockholm, New York and London. It also has to contend with other listings in Frankfurt, Paris and Zurich as well. “The big companies are very aware of what investors want. They are very international in their attitude, so there’s a pretty good level of competence and awareness of the need for good IR,” says Bjorn Westburg, head of investor relations at Nordic Baltic Holding, the largest banking group in the region. While the practice of IR may be well developed at the giants of corporate Scandinavia, it’s a different story at the small and medium-cap firms. International investors largely confine their interest to household names like Nokia and Ericsson, while firms outside of the top indexes struggle to attract attention from the international markets.
“There are a lot of new listings, mainly smaller companies that are starting up,” says Katarina Lybeck, director of corporate communications at the Finnish metals group Outokumpu. Lybeck, current chairman of the Finnish IR society (Firs), believes these companies are now working hard at IR in an effort to attract overseas investment. This sentiment is echoed by Steen Juul Jensen in Denmark: “Foreign investors are interested in the top 20 KFX index stocks, and also a few other firms on the fringes of the index here. These companies can provide foreign investors with both the liquidity and size they demand. So among the large companies in Denmark, the level of professionalism in IR is at a comparable level to other Nordic countries,” he says.
Coupled with the struggle for investment is the need to increase analyst coverage for firms that lie outside of the main Nordic indexes. “The small companies worry about the lack of coverage. It’s not easy – you can go direct through a brokerage house or you can turn to consultants in order to boost your profile,” says Lybeck.
Some observers cite the shift by the investment institutions from having country-based analysts to sector analysts as the prime reason why smaller Nordic-listed companies struggle for coverage. But Lybeck disagrees, believing the move to sector-based analysis has had a good impact: “At least now the analysts have a need to know about your company. They try to scout out companies in the sector, as it’s in their interest not to miss out on good companies.” But she acknowledges that the shift from country-based analysis has its downside: “Previously you could count on investor interest in Finland because of the vibrant market. You had analysts flying into Helsinki because there were many companies there they wanted to visit. Now this is not the case. How often will a sector analyst travel here if there’s only one company to visit?”
Analyst bypass
The drawbacks of the demise of the Nordic-focused analyst are highlighted by Olli Virtanen. “In London in the early 1990s companies could always come and meet Nordic analysts. Now with sector analysts it is harder for them to get coverage, unless you are a Nokia, Ericsson or a forestry company,” he claims. In response to this, more and more Scandinavian firms are moving to make direct contacts with the big investors. It isn’t a case of neglecting the analysts, Virtanen adds, rather that companies have begun to look for other routes to reach investors.
The shift to sectoral analysis has also thrown up cultural problems, says Mari Thjomoe. “It can be difficult if the analyst does not understand the local capital markets, accounting standards or the management mentality of Norwegian companies.” And though Scandinavia encompasses four different countries with four different languages, it continues to be pigeon-holed as a single region by the investment community. Is this not a sweeping categorization of four culturally distinct nations? Pia Irell doesn’t think so. “The countries are pretty much aligned with each other. In terms of IR, it could be that Sweden was ahead in the early days, but the large companies are all at about the same level,” she says.
Given this regional harmony, it is perhaps surprising that the Scandinavian equity markets have remained largely independent, despite the recent market merger love-in that struck Western Europe this year. Though there have been efforts to forge links between the exchanges, tangible results have been thin on the ground. Stockholm has been active in seeking and developing links with neighboring exchanges in the past, but it all ended in tears when disagreements between Stockholm and Helsinki killed any prospect of an alliance. The Finnish market opted instead to build a link with Frankfurt, while Stockholm and Copenhagen exchanges have been cooperating for a few years now. “The Scandinavian countries are watching the progress of the iX merger very closely, but the party line here is that there will always be room for niche markets, smaller markets,” says Virtanen.
This view was presented at June’s Nordic IR seminar in Helsinki by Jukka Ruuska, CEO of Helsinki Exchanges. He outlined his vision of a single global trading interface developed by the world capital markets, allowing brokers to deal in stocks from different countries at the same time. But according to Bjorn Westburg, there has been little reaction in Scandinavia to the global market mergers (bar the Swedish exchange OM bidding for the London Stock Exchange), but he doesn’t think this is the end of the story for the Nordic markets. “If these exchanges are to survive, they need to be very good at keeping costs low,” he says. “They must maintain efficiency and liquidity. Fortunately, the Swedish exchange is currently one of the best around,” he adds.
Insiders’ market
Westburg may be happy with his local stock exchange, but this sentiment does not extend across the border into Norway, where IROs are worried at a spate of insider trading cases at the Oslo stock exchange. “We are all very concerned about how the Norwegian stock market is being viewed by outside investors. Some people perceive it as an insiders’ market and this could make things difficult for Norwegian companies,” says Mari Thjomoe.
But increasingly Nordic companies are looking away from local markets towards London and New York. “We are in small markets here that are relatively distant from the other main markets,” says Lybeck. A listing in London or New York is now common among the larger companies in the region. The London-based banks spearheaded the first wave of foreign investment into Nordic companies, mainly because of the position of London as the hub for European investment. But the holdings of UK institutions are gradually being replaced by the deeper pockets of US banks. The growing importance of US investors doesn’t mean London is set to be replaced as the top travel destination for Scandinvian IROs. “America is very important, but you tend to find the US banks deal with European companies through their London offices,” says Thjomoe. Despite this, Nordic companies have become adept at tapping into the US investment pool. Several large companies now run IR offices from the US, often recruiting US IR professionals to run the operations. But few can afford this luxury, so an American IR base remains the preserve of a few giants.
In nearly all respects, Nordic IROs are concerned with the same issues as their colleagues in North America and Western Europe. There are strong IR associations – witness the growth of the Finnish society, Firs. Founded ten years ago, it now boasts over 100 members. Not bad going in a country of only 5 mn people.
Issues such as old economy versus new economy and the role of the internet in IR crop up regularly when talking to Scandinavian IR professionals. But this should come as no surprise to informed observers. Investor relations in the Nordic countries has reached a level where it can arguably be placed on the same platform as North America and the UK in terms of development. And that can only be healthy for Scandinavian companies of all shapes and sizes.
