FOREIGN CAPITAL INFLOWS AND STOCK MARKET PERFORMANCE IN SELECTED AFRICAN COUNTRIES
FOREIGN CAPITAL INFLOWS AND STOCK MARKET PERFORMANCE IN SELECTED AFRICAN COUNTRIES

Summary/Abstract: Foreign capital inflows are an important factor that affects stock market performance as well as the economy of any country. This study aims to determine the nexus between foreign capital inflows and stock market performance in Nigeria, Kenya, Egypt and South Africa. The study used annual time series data from four African countries for the period 1990 to 2018. The Autoregressive distributed lag (ARDL) approach to cointegration relationship modelling was used in the empirical analysis. The findings of the study revealed that FDI and FPI have a significant positive relationship with market capitalization rate among the countries in Africa. FDI and FPI have an insignificant relationship with stock market volatility in African countries. The study recommends that countries should devise effective policies and standards to effectively obtain more foreign capital into the market. Inflows of foreign should be strongly based on internal developments or factors within the stock market such as high liquidity or structural depth of the market and not on investor-determined factors that are usually extraneous to the characteristics of the capital market. Finally, in as much as the study focuses on the role of foreign capital inflows in the stock market, domestic development of the market is critical for long-run sustainability.

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