On the other hand, the surge in foreign equity holdings suggests that investors are increasingly optimistic about the prospects of Ghana's stock market. The improved performance of the stock market, driven by various factors such as economic growth, improved corporate governance, and increased investor confidence, has likely contributed to the increased appetite for Ghanaian equities. 

This trend is a positive development for the country's economy, as it indicates that foreign investors are willing to take a long-term view and invest in Ghana's growth story.

Debt market

The Bank of Ghana's expectation that foreign participation in the debt market will improve in 2025, driven by sustained macroeconomic recovery and favourable economic prospects, is a positive note. This optimism is likely based on the government's efforts to stabilize the economy and implement policies that promote economic growth and stability.

The central bank's forecast suggests that the government and the Bank of Ghana are working to create an environment that is conducive to foreign investment, which is essential for the country's economic development.

However, the Review also highlighted concerns about market concentration, with trading activity dominated by a few equities. The Herfindahl-Hirschman Index (HHI) remained unchanged at 0.39 at end-December 2024, indicating a moderate level of concentration.

This raises questions about the breadth and depth of the market, and whether it is accessible to a wide range of investors. Market concentration can be a challenge for investors, as it may limit the availability of investment opportunities and increase the risk of market volatility.

Stability index

The stability dimension of the stock market recorded notable improvement. The stability index rose to 0.39 at end-December 2024, from 0.23 a year earlier, driven by a significant reduction in loss-making equities. The proportion of listed shares with negative returns dropped to 12.9 per cent from 33.3 per cent at the end of December 2023, signalling stronger resilience in market performance. This improvement in market stability is a welcome development, as it suggests that the market is becoming more robust and less susceptible to shocks.

The reduction in loss-making equities is a positive trend, as it indicates that companies are becoming more profitable and financially stable. 

This development is likely driven by various factors, including improved corporate governance, better management practices, and increased efficiency. As companies become more profitable, they are likely to attract more investors, which can lead to increased investment and economic growth.

Overall, the Bank of Ghana's 2024 Financial Stability Review provides valuable insights into the trends and dynamics of foreign investment in Ghana's capital market.

While there are concerns about market concentration, the improvement in market stability and the surge in foreign equity holdings are positive developments that suggest a growing interest in Ghana's stock market. 

As the economy continues to recover and stabilize, it is likely that foreign investment will play an increasingly important role in driving growth and development.

The government and the Bank of Ghana must continue to work together to create an environment that is conducive to foreign investment and promotes economic growth and stability.