PSX Bullish Week: Liquidity Surge Drives Record Gains
- The Pakistan Stock Exchange (PSX) began 2026 with meaningful gains, driven by strong local investment and anticipation of further monetary easing, though foreign investment remains cautious.the benchmark KSE-100...
- The KSE-100 index achieved record highs during the initial trading sessions of 2026, demonstrating robust investor confidence.
- This positive momentum followed a strong performance in 2025, with the PSX being recognized as one of the world's fastest-growing equity markets.
Pakistan Stock Exchange Reaches Record Highs in Early 2026
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The Pakistan Stock Exchange (PSX) began 2026 with meaningful gains, driven by strong local investment and anticipation of further monetary easing, though foreign investment remains cautious.the benchmark KSE-100 index surpassed 187,000 points before a period of profit-taking tempered the week’s overall advance.
Market Performance in the First Week of 2026
The KSE-100 index achieved record highs during the initial trading sessions of 2026, demonstrating robust investor confidence. The index briefly exceeded the 187,000-point mark before some investors chose to realize profits later in the week. This surge was primarily fueled by considerable liquidity within the market and expectations of additional interest rate reductions.
This positive momentum followed a strong performance in 2025, with the PSX being recognized as one of the world’s fastest-growing equity markets. Though, this growth hasn’t translated into foreign investment.
According to the State Bank of Pakistan (SBP) Statistical Bulletin for the first quarter of FY26, net foreign outflows from the equity market totaled $393 million during the first half of FY26, compared to inflows of $142 million, indicating continued hesitancy among international investors.
Factors driving the Rally
excess liquidity in the market, with limited choice investment options, played a crucial role in driving the PSX rally. Furthermore, decreasing consumer inflation has increased expectations for another reduction in the policy interest rate by the State Bank of Pakistan. This expectation further encouraged local buying activity.
The SBP has already begun easing monetary policy; on November 28, 2025, the Monetary Policy Committee reduced the policy interest rate by 100 basis points to 21%.
Foreign Investor Sentiment
Despite the positive domestic performance, the PSX continues to struggle to attract significant foreign investment. Net outflows of $393 million in the first half of FY26 highlight ongoing concerns among overseas investors.This disparity between domestic gains and foreign caution presents a challenge for the long-term sustainability of the PSX’s growth.
The lack of foreign participation is a notable contrast to the market’s overall performance, as reported by Dawn on January 5, 2026.