How to invest in stocks in Finland 2021 – that will be the topic of today’s article.
Nothing written here should be considered as legal or any other form of advice, but we have done our best to ensure it is accurate.
If you are looking to invest, don’t hesitate to contact me, email (advice@adamfayed.com) or use the WhatsApp function below.
Many people are especially eager to know how a non-resident can invest into share markets such as Finland.
Introduction
The stock market is known to provide unique opportunities for capital investment and growth that other assets and forms of value creation are unlikely to match. After all, the stock market, in its true essence, is a financial assessment of everything that is produced, traded, bought by business, the population of a country or even the planet.
This can be provided by such eloquent facts as, for example, the shares of Google or Facebook are in many ways superior in capitalization (500 and 450 billion, respectively) to powerful manufacturing corporations, oil giants and other businesses of the last century.
And this is a great merit not only of the created product, skillful management, but also of the free market, which appreciated the real value of the company.
However, in order to go this way, both the owners and shareholders had to initially develop a successful business model and buy shares in a company that no one had really known about on the market.
Naturally, such a combination of circumstances cannot be completely attributed to the shrewdness and luck of the shareholders – investors. In many ways, what they received is the result of their ability to understand the nature of business, the way capital works and the creation of its value using stocks and other financial market instruments.
At first glance, the work of an investor with stocks seems very simple – come to the market and buy whatever your heart desires, sooner or later something will grow and there will be millions in your pocket.
However, such an overly simplistic approach to understanding investing in the stock market is very unlikely to bring real results. In any case, investing in stocks, or other assets, needs at least a minimal ability to analyze what is supposed to be invested in.
What about investing in Finland stocks: Finland welcome potential
Finland is open to honest business, and there are no restrictions for those wishing to start a business. The only peculiarity is that one of the co-founders of the company must be a citizen with a permanent residence status in Finland.
You have finances, and you want to invest and receive income, turn your gaze to a northern country, where there is stability, where there are good opportunities for investing capital, and start your business here.
Today, foreign entrepreneurs in Finland, when investing in the Finnish economy, are provided with the national treatment for in the relevant agreements. Foreigners can also purchase shares of Finnish companies with some restrictions, which are determined by the state monopoly on certain types of activities.
The state also promotes investment activities, especially small and medium-sized companies, by providing favorable conditions for tax loans and subsidies.
Finnish investment funds specialize in regional development, financing start-up businesses and providing them with long-term loans.
Finland is a competitive country, the risks are minimal, although business cannot exclude the risk. Buying a ready-made company is one of the successful ways to start a business with a ready-made position in the market, with its own trained local staff and ready-made equipment that meets European standards.
Finnish stock market: trading features
Many investors and traders differ little from each other in terms of market behavior. This is expressed not only in following standard types of trading strategies, but also in following traditional ideas and norms of where and how to allocate your capital.
For example, investors and traders, especially beginners, being influenced by stereotypes, consider it their duty to enter the most powerful trading floors in the world as soon as possible in New York, London, Tokyo or Hong Kong. However, as practice shows, in this pursuit of “perfection” many excellent investment opportunities, which are literally “across the road”, are overlooked.
This article will tell you about the Finnish stock exchange, its stock market and why it can be so attractive to non-resident investors not only in neighboring countries, but also in more distant regions in the world.
Why Finland?
On the one hand, it is very simple to answer this question because this is Europe, there is order, and so on. In fact, the main thing that an investor should take into account in his strategy for choosing a stock market is the economy of the country in which stocks or other trading instruments of which are supposed to invest their capital.
To Finland’s credit, despite the fact that it is in a rather harsh climate, it is not so rich in natural resources, and the territory of the country is not so large, it is attractive not only for tourists from St. Petersburg who regularly go there for food and rest, but and investors.
It is Finland with its economy that looks quite confident against the background of the pan-European slowdown in the growth of economic indicators.
The main share of Finland’s development is provided by such industries as high technology, especially in the field of telecommunications, forestry and services in the field of tourism, recreation, education, etc. The industrial production sector, in addition to the timber industry, is also represented by such types of production as shipbuilding, loading equipment, port equipment, etc.
The average growth rate of the Finnish economy is approximately 2.8% per year. The unemployment rate is 7%.
Finland is also favorably distinguished by such factors as close integration with all neighbors, including both the Baltic countries, and with Sweden, Denmark, Norway. The country’s financial system is also closely linked to the pan-European structure of public and private financial systems.
Finland Stock Exchange – 100 years of history
Despite the fact that Finland managed to survive the not so simple times of the 20th century, its stock exchange is more than 100 years old and today is one of the most technologically advanced trading floors in Europe.
The history of the stock exchange in Helsinki began in 1912. Until 1984, it existed as a free association of banks, traders and brokers. Trades on it were carried out as usual for that time – in the trading floor.
Already in 1990, the first electronic trading terminals appeared on the Helsinki Stock Exchange, operating on a special platform HETI (Helsinki Stock Exchange Automated Trading and Information System).
In the 2000s, the trading platforms of the Helsinki Stock Exchange were merged not only with the EU countries (such as Norway, Sweden, Denmark), but also with the exchanges of Tallinn, Riga and Vilnius, which allows investors to work on a large segment of the European stock market from one terminal or a brokerage account.
Currently, about 150 Finnish companies are listed on the exchange, the main index of the exchange is the OMXH25 index. The trading platform has been updated and is now based on Nasdaq solutions.
More about Helsinki Stock Exchange
The Helsinki Stock Exchange, officially the Nasdaq Helsinki, is Finland’s premier stock exchange. It was formerly called OMX Helsinki and Nasdaq OMX Helsinki after the merger with OMX and the acquisition of OMX Nasdaq, respectively.
It is one of eight stock exchanges owned by Nasdaq Nordic, a subsidiary of Nasdaq that operates stock exchanges in several Scandinavian and Baltic countries and provides access to 80% of the Nordic and Baltic securities markets.
The headquarters of the Helsinki Stock Exchange is located in Helsinki, the capital of Finland and the most populous city. It lists 141 companies with a market capitalization of € 232.6 billion. Bonds and derivatives are also listed on the exchange.
The listings include well-known and actively traded companies such as Nokia, Fortum, Kone, Sampo Group and Neste Oil.
The exchange operates the OMX Helsinki 25, a market value weighted index that consists of the 25 most actively traded stocks. The weight limit for each company is 10%.
This index was previously called HEX25 and is widely used as a benchmark for the Finnish stock market. The exchange also manages OMX Helsinki 15 as well as an index of the top 40 companies in terms of sustainability and several indices reflecting the performance of various sectors and industries.
What can be bought or sold on the stock exchange in Helsinki?
As a modern trading platform, the Helsinki Stock Exchange offers its clients a wide range of investment and trading instruments.
If we talk about the equity sector, then due to the fact that the exchange is integrated with its platform in the exchanges of other countries, there is a unique opportunity to buy, sell, and participate in the initial public offering of companies in Sweden, Iceland, Norway, Denmark and the Baltic countries.
For long-term investors, or those who are planning their family investments with the expectation of the European market, there is a large selection of investment funds in which you can invest your capital.
These are ETF funds (see How to Invest in Foreign ETF Funds: and cooperative funds, both state and private pension funds, etc.
For the most conservative investors, there is an opportunity through the Finnish stock market to purchase both the bonds of the European Union (Eurobonds) and the bonds of the countries belonging to it, including local Finnish municipalities. The bond sector is also heavily represented by corporate debt instruments from virtually all of Europe.
If we consider the Finnish stock market and its trading platform, then in addition to purely technical and investment advantages and opportunities, a non-resident investor receives:
- The ability to receive income from the work of your capital abroad, eliminating the need to move money across the border, and to earn it where it is most likely to be spent, i.e. in Europe.
- A wide range of trading instruments from many Nordic countries from one trading account
- Reliability and near-perfect functioning of the EU financial system,
- Banking and brokerage services according to the highest European standards (in one word – Ordnung)
- Protecting the property and rights of investors by real justice
- The absence of both criminal and political risks for wealthy clients, which has recently come to the fore.
- Finland’s proximity to many regions of your country, which makes it easy, if necessary, to quickly get to a normal European bank or broker to complete the necessary documents.
In order to start trading or investing on the stock exchange in Helsinki, you can contact almost any broker with European jurisdiction, but of course it is better to do this in any of the Nordic countries or the Baltic countries. For example, you can contact European banks with investment units, such as Nordea bank or similar.
The management of transactions, as well as of your accounts, after the conclusion of a brokerage agreement, takes place remotely via the Internet, and you can safely travel, study, receive medical treatment around the world with the money that brought income from investments in European assets, including through the Finnish stock exchange.
General Legal M&A introduction when buying or investing in a Finnish business
The buyer and seller must first agree on the structure of the acquisition and the related assets included in the transaction. It is important to decide whether the transaction will be an asset or share purchase.
Buying an asset is usually easier for the buyer as it leaves most of the potential or hidden corporate liabilities (such as taxes) to the seller. Buying shares also means paying transfer tax (1.6%) for the buyer in Finland.
However, the seller’s tax regime is often better for a stock transaction than for an asset transaction. Arbitration is generally the preferred solution to disputes in M&A transactions in Finland, especially with foreign buyers.
The documents used in a typical purchase are Broker’s Letter of Compensation, Letter of Intent, and Sales Agreement (or Sales Invoice).
Therefore, the practice in Finland does not differ much from the standard world practice. The most commonly used LOI type is a mandatory format, which means that the Letter of Interest has legal implications and possibly a basis for a claim for damages.
How to choose stocks on the market for a beginner?
Newbies – investors often have to start their activities in the market on the basis of their still meager knowledge and lack of experience, rely on the knowledge and skills of other people, or on their flair or intuition. In many ways, this is a dead-end path in achieving any significant results in the stock market.
The best way is still, albeit not entirely simple, but your own independent approach to investing, based on some fundamental knowledge and laws of the market and money.
These include various forms of analysis and research of the market and assets, ranging from the simplest forms of technical analysis to analytical methods for the fundamental study of issuers and markets.
As a practical tool for choosing stocks when investing, you can at the initial stage use some simple methods of analyzing assets.
These techniques consist of three main groups:
- Analysis of assets based on the frequency (cyclicality) of changes in their value
- Analysis of stocks based on the value method
- Analysis of stocks based on the application of risk management techniques
As an example of such a technique for choosing stocks for investment, the following simple algorithm can be offered for a novice investor’s actions:
Buy at the low – sell at the high. Any stock has its own periods of price movement. These periods have different meanings and depend on many factors – recession and recovery in the economy, industries, events related to the company itself. For example, ideally the best time to buy stocks is the economic crisis, when stocks in good companies can be bought at very attractive prices. Of course, periods can range from several months to several years. But that is the investor’s job to find a moment when an asset can be bought at the lowest prices for a certain period and sold when there is general euphoria in the market.
Buy only shares of the most promising and reliable companies. There are many companies traded on the market, large and small, with different histories and business models. In this case, you should always buy shares of those companies whose business is not very susceptible to the volatile economic environment or whose products or services are in demand among the majority of the population.
Such groups include such sectors of the economy as banking, companies operating in the export or consumer market. There is such a practice in the market that each type of stock is assigned its own reliability rating.
The most reliable shares or assets are instruments belonging to the highest class of reliability and investment attractiveness or group A (according to the world rating agencies such as S&P, Fitch Moodys).
Select the most liquid stocks. The liquidity of a security is determined in such a simple way as the volume of trades in it in any period of time. The higher the trading volume for a stock, the more liquid it is.
It is quite simple to estimate the trading volume for a stock – just look at the stock charts presented by various resources or trading terminals of brokers. Liquidity, as a characteristic, gives such a definition as the demand for a stock by the market. If a share is not in demand by the market, then its business model is not capable of providing an acceptable income for the investor.
The real value of the share. Each share is an asset that represents a real business. If the business is successful, then the price of a share on the market rises, if not, no one remembers such a share.
However, there is a big difference between the price of a stock and its real value. The value of a share is its ability to provide a return on the money invested by the investor in it within a reasonable time frame. The P / E or price / yield model is used as an indicator of the value of a share.
In investment practice, it is generally accepted that if the P / E is below 4-5, the stock is undervalued by the market and can be considered a candidate for buying. If this indicator is above 10, then the stock is trading on the market above its real value, and it is better to wait with a purchase.
In order to take the initial data on the calculation of this indicator, it is not necessary to delve into the company’s reporting, and it is enough to use the data that are published in many open sources of information and issuer profiles – brokerage companies, analytical resources or on the stock exchange website.
In addition to the listed main methods of stock selection, you can also add practical recommendations such as, for example, avoiding stocks of companies associated with any political events or persons with a large share of the state in the capital, or whose business model is based on government orders.
This is due to the fact that any political events will have a disproportionately high impact on the value of shares, and, accordingly, their assessment by the market will not be entirely adequate, and therefore more risky.
So here was all the necessary information about stock investments in Finland. If you are really interested in it, Finland stocks are definitely a good option. It is not that popular, but that makes this country stocks unique and gives it a good potential.
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Further Reading
There are many Swedish companies that people want to invest in.
How can you invest in the stock market in Sweden, including if you are a non-resident?
To read more, click on the link below.
