ASEAN's strength stems from its diversity, which generates a plethora of diverse market opportunities. Over the last few decades, Foreign Direct Investment (FDI) has risen significantly as a major source of international capital transfer, but the COVID-19 pandemic had a detrimental effect on FDI flows, with the outlook for ASEAN remaining highly unpredictable and contingent on the length of the crisis, the efficacy of policy efforts to encourage investment and mitigate the economic consequences of the Pandemic. This study examined the long-run relationships and short-run dynamic interactions between FDI and its determinants comprising of market size, trade openness, stock market capitalisation and financial development over the period 1970 to 2019. The study applied the dynamic heterogeneous panel estimation techniques of Mean Group (MG), Pooled Mean Group (PMG) and Dynamic Fixed Effects (DFE) to analyse a set of macro panel data of the ASEAN-5 countries, to establish the possible relationships between these variables. An analysis of the results revealed the existence of a long-run causality between FDI and its predictors, indicated by the significant error correction terms for the models tested in this study.  There was evidence that market size and stock market capitalization significantly contribute to FDI with market size being the most dominant contributor. Interestingly, the study also revealed that trade openness and financial development were not significant in determining FDI in the selected countries. The paper concludes with an examination of policy implications and also sheds some light on the outlook of FDI in ASEAN-5 post Covid 19.

Keywords: foreign direct investment, financial development, pooled mean group, ASEAN-5