Experts indicate that this rally is fuelled by a mix of political tailwinds, economic adjustments and diplomatic breakthroughs.
Diplomatic boost from WashingtonThe surge coincides with improving ties between Washington and Islamabad. Ahsan MehantiManaging Director and CEO of Arif Habib Commodities, told Dawn News the rally reflected “investors’ confidence and risk appetite,” backed by the stronger Pakistani rupee, foreign direct investment from Saudi Arabia and a new Pakistan–Saudi defence pact.
A landmark trade deal signed in July between the US and Pakistan allowed Washington to lower tariffs for Islamabad and extend support to develop its untapped oil reserves. The thaw has come at a time of strains in bilateral ties between the US and India, with President Donald Trump earlier this year raising tariffs on New Delhi over its discounted Russian oil imports.
Only last week, the PSX had already breached 161,000 after Trump’s White House meeting with Prime Minister Shehbaz Sharif. According to the PMO, Sharif pressed for greater US investment in agriculture, technology, mining and energy, saying he was confident “the Pakistan-US partnership would be further strengthened to the mutual benefit of both countries.”
Also read: Pak PM Sharif, Army Chief Munir meet US President Donald Trump at White House
Trump, speaking in the Oval Office, described Sharif and Army Chief General Asim Munir as “very great guys,” while the two sides also discussed Gaza, as per a report by the Indian Express.
Adding to the momentum, aggressive buying from local mutual funds has also underpinned the rally. According to Arab News, NCCPL (National Clearing Company of Pakistan Ltd) data showed that mutual funds were hefty net buyers on Friday, with the momentum carrying into this week’s sessions and giving the market a solid lift, said Maazz Mulla, vice president for equity sales at Karachi-based Topline Securities.
Economic underpinnings
Diplomacy isn’t the only driver. Islamabad has moved to shore up its finances with a ₹1.225 trillion circular debt financing agreement with commercial banks, while Pakistan’s foreign exchange reserves have risen to $14.4 billion. Instruments such as Panda bonds are also under consideration to diversify funding.
The Asian Development Bank projects Pakistan’s GDP growth at 3% in FY26, though inflation could edge higher at around 6%. At the same time, an IMF mission is in Islamabad for reviews of its $7 billion External Fund Facility and $1.4 billion Resilience and Sustainability Facility, Arab News reported.
Also Read: Trump’s meeting with Pakistani PM signals shift in US stance, not strategic tilt, says former envoy
