Stock exchanges and foreign direct investment (FDI) inflows are interconnected through their influence on investor confidence, capital accessibility, and economic growth. A well-functioning stock exchange signals economic stability, encouraging foreign investors to commit long-term capital to a country.

Stock markets provide liquidity, allowing investors to exit investments easily. This reduces perceived risk and attracts FDI. Moreover, a vibrant stock exchange enables firms to raise capital efficiently, supporting expansion and making the country more attractive for foreign investors.

FDI and stock markets reinforce each other. Increased FDI boosts local businesses, improving stock performance. Conversely, a growing stock market reassures foreign investors about economic prospects, leading to higher FDI.

Additionally, stock market transparency and strong regulations enhance investor trust, making FDI inflows more sustainable.