BLOGS
PSX liquidity surge: What’s driving investor confidence?
By Sameer Sagar
The Pakistan Stock Exchange (PSX) has witnessed a notable surge in liquidity in recent weeks, marking one of the most robust phases of trading activity seen this year. Investor confidence previously weakened by political uncertainty, inflation spikes, and global market pressures appears to be regaining strength. The renewed momentum has pushed daily trading volumes higher, broadened sector participation, and encouraged both institutional and retail investors to re-enter the market. The sudden rise in liquidity is not accidental; it is the result of multiple converging factors that together have created a more optimistic outlook for Pakistan’s financial markets.
One of the strongest contributors to this liquidity surge is improved macroeconomic stability. After months of volatility, the exchange rate has stabilized, inflation has begun to ease, and the country’s current account position is showing signs of improvement. Investors, both local and foreign, respond quickly to macro-level shifts, and the perception of stability is often enough to revive trading activity. A stable rupee reduces the fear of sudden value erosion, while easing inflation boosts expectations of policy relaxation in the coming months. This macroeconomic calm has helped investors feel more secure about deploying capital into equities.
Another important factor is Pakistan’s ongoing alignment with the IMF program. Compliance with IMF conditions—however challenging in the short term—has signaled fiscal discipline and economic seriousness. Markets tend to react positively to clear policy direction, and the government’s adherence to targets related to taxation, monetary tightening, and energy reforms has reassured investors that Pakistan remains committed to economic correction. Each successful IMF review reduces uncertainty, improves sentiment, and enhances the credibility of future economic projections. This sentiment has been strongly reflected in the rising liquidity seen across the PSX.
Renewed interest from institutional players has also played a significant role. Mutual funds, insurance companies, and large brokerage-backed investment desks have been increasing their exposure in the market, particularly in energy, banking, and fertiliser sectors. Institutional inflows have a multiplier effect: when major funds increase their participation, retail investors typically follow suit. This creates a broader base of trading activity, lifting both volumes and turnover. Furthermore, foreign portfolio investors—though still cautious—have shown signs of re-engagement, attracted by Pakistan’s relatively low market valuations and improved economic outlook.
Corporate earnings have served as another catalyst. Many listed companies, especially in the banking and energy sectors, have reported strong profitability despite economic challenges. Banks are benefiting from high interest rates, while energy companies are gaining from improved circular debt settlements and favorable global commodity movements. These earnings trends have reinforced the narrative that undervalued stocks may offer significant upside potential. For investors searching for returns in an uncertain global environment, the PSX has begun to look attractive once again.
Policy measures taken by the Special Investment Facilitation Council (SIFC) have also helped improve market confidence. The SIFC’s efforts to streamline investment processes, address bureaucratic delays, and support large-scale initiatives have sent a positive signal to investors. When major economic decisions appear coordinated and aligned across key institutions, markets react with increased confidence. Recent developments related to Reko Diq financing, energy sector restructuring, and efforts to boost foreign direct investment have all contributed to the brighter sentiment reflected in trading volumes.
Another decisive element in the liquidity surge is the shift in market psychology. After months of correction and consolidation, the market appears to have found a bottom. Investors who were previously hesitant are now more comfortable re-entering positions, believing the downside risk has reduced. This behavioral shift is crucial: once confidence begins to build, it often feeds into itself, pushing volumes higher. The anticipation of a year-end rally, historically common in the PSX, is also adding fuel to the momentum. Many traders expect December to bring improved sentiment, dividend expectations, and portfolio rebalancing, further stimulating liquidity.
Increased participation from retail investors has amplified this momentum. Better digital access, user-friendly trading platforms, and growing financial literacy have encouraged more individuals to engage with the stock market. Additionally, the absence of alternative high-return investment avenues—such as real estate, gold, or unregulated schemes has pushed more savings into equities. Retail investors are particularly active in mid-cap and high-beta stocks, contributing to the broader rise in trading volumes.
However, while the surge in liquidity is a positive development, it also comes with necessary caution. Sustained investor confidence will depend on continuity in economic policies, consistency in government decision-making, and effective management of inflation. Any abrupt political or fiscal disruptions could reverse current gains. Nevertheless, the underlying drivers of the liquidity surge appear stronger and more structural than before, giving the market a more resilient foundation.
The PSX’s recent performance suggests that investor confidence is on the mend, supported by macroeconomic stability, policy reforms, earnings strength, institutional interest, and an improved risk outlook. While challenges remain, Pakistan’s capital market seems to be entering a more constructive phase—one where liquidity, sentiment, and opportunity converge to shape a more optimistic investment landscape.
Why multinationals are reconsidering Pakistan: ‘Opportunities and Bottlenecks’
By Zaira Hasan
After years of caution and capital outflows, multinational corporations are once again beginning to reconsider Pakistan as a potential investment destination. This renewed interest—though still at an early stage—reflects an improving macroeconomic environment, revived engagement with global lenders, and gradual policy reforms aimed at streamlining investor processes. As Pakistan attempts to stabilize its economy and rebuild credibility, multinational companies are reassessing the country’s strategic value. Yet the landscape remains mixed, with both promising opportunities and persistent bottlenecks shaping investment decisions.
A major factor influencing this shift is the improvement in macroeconomic stability after a turbulent period. The exchange rate has stabilized, inflation has begun to ease, and the current account deficit is narrowing. These developments have restored a degree of predictability that global companies rely on before deploying capital. For many multinationals, stability in currency markets and inflation trends matters more than short-term growth prospects, because it influences profit repatriation, operational costs, and long-term planning. Pakistan’s recent progress on these fronts has therefore helped rebuild some confidence.
The country’s ongoing engagement with the IMF has also provided reassurance. Multinationals often view IMF programs as a signal of policy discipline and structural reform. Pakistan’s commitment to fiscal adjustments, tighter monetary policy, and enhanced revenue generation suggests that the government is moving toward a more sustainable economic framework. Even though IMF-driven reforms can be challenging in the short run, they tend to create a more transparent and predictable environment in which global companies feel safer operating.
Another key development is the role of the Special Investment Facilitation Council (SIFC), which has changed how Pakistan manages foreign investment. For the first time, both federal and provincial authorities are aligned under a single umbrella to expedite approvals, address bureaucratic hurdles, and fast-track major projects. This platform has helped resolve investor grievances that previously took months—if not years—to address. Multinationals that had grown frustrated with Pakistan’s complex and slow bureaucratic processes now see signs of improvement, giving them reasons to reconsider investment plans that were once put on hold.
Pakistan’s demographics further strengthen its appeal. With a population exceeding 240 million and a rapidly urbanizing middle class, the country offers a vast consumer market. Even during economic downturns, Pakistan’s consumption patterns have shown resilience, providing opportunities for businesses in fast-moving consumer goods, telecommunications, pharmaceuticals, retail, and e-commerce. Global companies recognize that while short-term volatility may persist, the long-term consumer potential of Pakistan remains attractive.
In addition to consumption-driven sectors, new opportunities are emerging in industries aligned with global trends. Renewable energy is gaining attention from Middle Eastern and Chinese investors due to Pakistan’s significant solar and wind potential. The revival of the Reko Diq project has also signaled the viability of large-scale mining operations in the country, encouraging interest in mineral exploration. Agritech and food-processing companies see potential in modernizing Pakistan’s agricultural value chain for domestic use as well as export. The information technology and business-process outsourcing sectors, supported by a young and skilled workforce, offer another promising frontier for multinational investment.
Despite this renewed optimism, several bottlenecks continue to weigh on investor sentiment. Policy inconsistency remains one of the biggest concerns. Sudden changes in tax rules, import regulations, or energy tariffs create uncertainty for businesses that require multi-year planning. For multinationals, unpredictability is often more discouraging than economic challenges themselves.
Energy costs and supply reliability also pose significant hurdles. High electricity tariffs, frequent adjustments, and the long-standing circular debt crisis increase operational costs, making Pakistan less competitive than regional peers such as Bangladesh or Vietnam. Many manufacturing-oriented companies weigh these factors heavily when deciding where to set up factories.
Regulatory complexity is another barrier. Although the SIFC has improved coordination, inconsistencies across provincial departments, slow approvals for land, environmental clearances, and utility connections continue to frustrate investors. For global firms operating in multiple markets, efficiency and speed are crucial.
Security perceptions, while improved, still influence boardroom decisions abroad. Even isolated incidents can trigger caution in headquarters unfamiliar with Pakistan’s local context. Similarly, foreign exchange restrictions introduced in recent years created difficulties for companies attempting to repatriate profits and make international payments. Restoring confidence in currency convertibility and ensuring smooth repatriation are essential to rebuilding trust.
As Pakistan works to restore economic stability, the coming years will determine whether multinational interest translates into actual investment. Sustained reforms, consistent policies, and a predictable business environment will be key to unlocking Pakistan’s potential. The opportunities are real: a large consumer base, untapped mineral wealth, strategic geographic positioning, and a growing digital ecosystem. The challenges are also real, but not insurmountable—provided the government continues its focus on structural improvements and investor facilitation.
Multinationals are watching Pakistan more closely than they have in years. The question now is whether the country can maintain momentum, address bottlenecks, and convert global interest into long-term, trans formative investment.
Reko Diq financing breakthrough: Economic impact beyond the stock market
PSMU Special
The recent financing breakthrough for the Reko Diq project has emerged as one of the most critical economic developments for Pakistan in 2025. Beyond the immediate excitement reflected in the stock market—particularly the surge witnessed in heavyweight stocks such as OGDC and PPL—the project carries profound macroeconomic, fiscal, and strategic significance. The arrangement of financing for Phase 1 has not only boosted investor sentiment but has also reshaped conversations around long-term economic stability, foreign investment, and Pakistan’s resource-driven growth prospects.
Reko Diq, located in Balochistan’s Chagai district, is among the world’s largest undeveloped copper and gold deposits. For years, its potential remained locked behind legal disputes, political uncertainty, and financing hurdles. The latest breakthrough signals a turning point, demonstrating Pakistan’s ability to execute large-scale, globally aligned mining projects. More importantly, it restores confidence among international investors who have often viewed Pakistan through the lens of risk rather than opportunity.
One of the most immediate impacts of the financing announcement has been psychological. Pakistan’s stock market, particularly the energy and mining-related sectors, reacted positively. Sentiment shifted from caution to optimism, and the KSE-100 Index regained momentum amid widespread buying interest. For a market that has been sensitive to political headlines, inflation spikes, and geopolitical tensions, the Reko Diq update offered a rare moment of clarity and forward-looking optimism. Heavyweights such as OGDC and PPL led the rally, indicating that investors are pricing in long-term value tied to the mining boom expected from Reko Diq’s development.
But the economic implications stretch far beyond the stock market. The project is expected to become one of Pakistan’s largest sources of foreign investment inflows. In a period where the country relies heavily on multilateral lenders, securing a steady pipeline of private-sector investment is vital for economic diversification. Reko Diq could help shift Pakistan’s narrative from dependence on bailouts to attraction of capital through natural resource development, industrial expansion, and export potential.
From a fiscal perspective, Reko Diq promises substantial government revenues in the form of royalties, taxes, and profit-sharing. Analysts estimate that once operational, the project could contribute billions of dollars to the national exchequer over its multi-decade life. This revenue stream is particularly crucial for Pakistan’s long-term fiscal planning, especially as the country pursues IMF-backed reforms and attempts to broaden its revenue base. In a landscape where export earnings and tax revenues often fall short of targets, large-scale mining activity provides an alternative path to stability.
Another critical aspect is the project’s impact on Pakistan’s balance of payments. Copper and gold are globally traded commodities, and the export potential of Reko Diq could significantly reduce pressure on foreign exchange reserves. Pakistan’s chronic dollar shortage has been a key driver of economic volatility. By expanding exportable output, Reko Diq strengthens the external sector, potentially stabilizing the rupee over the long term. This aligns with the government’s broader strategy of boosting non-traditional exports, alongside IT, minerals, and value-added agriculture.
The financing breakthrough also holds strategic value in the context of regional geopolitics. Balochistan’s economic development has long been a challenge due to security concerns and political sensitivities. Major foreign-led investments—conducted transparently and equitably—can contribute to regional stability by creating jobs, improving infrastructure, and integrating local communities into national development. The project is expected to generate thousands of direct and indirect employment opportunities, opening new economic avenues in one of Pakistan’s most underdeveloped regions.
For Pakistan’s business environment, this success sends an important message: large-scale, internationally governed projects can indeed move forward in the country. This is particularly meaningful at a time when investors have been wary due to policy inconsistency, taxation concerns, and fluctuating business confidence. The successful mobilization of financing for Reko Diq demonstrates the viability of long-term partnerships between the government and global corporations, setting a benchmark for future ventures in mining, energy, and infrastructure.
However, challenges remain. Ensuring transparent governance, environmental compliance, equitable revenue distribution, and long-term sustainability is essential for maximizing benefits. The government must also maintain policy stability to avoid the regulatory uncertainties that previously stalled the project. If managed effectively, Reko Diq’s success could pave the way for exploration of other mineral-rich regions across the country, unlocking a new era of resource-driven growth.
In essence, the Reko Diq financing breakthrough is not just a mining update—it is a signal of economic revival, investor confidence, and structural transformation. While the stock market’s positive reaction is visible and immediate, the true impact of the project will unfold gradually through enhanced foreign investment, stronger fiscal capacity, export growth, and regional development. For Pakistan, Reko Diq represents more than a deposit of copper and gold; it offers a strategic opportunity to shape a more resilient and diversified economic future.