Ali Nawaz, CEO of Chase Securities, Reveals Strong 2026 Rally Triggers for Pakistan Stock Exchange
Pakistan’s stock market stands at a critical inflection point, and Ali Nawaz, the Chief Executive Officer of Chase Securities, is sharing a powerful outlook for 2026. According to his latest market insights, the Pakistan Stock Exchange (PSX) is poised for a significant rally driven by multiple converging economic factors and improved macroeconomic fundamentals.
Market Fundamentals Support PSX Rally
The primary driver of PSX’s expected performance in 2026 relates to macroeconomic stability. Ali Nawaz emphasizes that the market is still trading at a 50% discount in dollar terms compared to its 2017 peak when it reached $100 billion in market capitalization. This valuation gap presents an extraordinary opportunity for investors. “We expect a sharp rally in 2025 and sustained momentum into 2026, assuming there is no political upheaval,” Ali Nawaz stated, highlighting political stability as a critical factor for continued growth.
KSE-100 Index Projections: Strong Growth Ahead
Industry projections indicate the KSE-100 Index could reach between 160,000 to 168,000 points by June 2026, representing potential returns of 27% to 34%. These projections are supported by comprehensive strategy reports from leading brokerages. The rally would be driven by three primary components: price-to-earnings (P/E) re-rating of approximately 11%, corporate earnings growth of 9-14%, and attractive dividend yields of approximately 9%.
Interest Rate Decline: A Key Catalyst
One of the most significant triggers for the 2026 rally is the expected decline in interest rates. The State Bank of Pakistan (SBP) has already begun aggressive rate cuts, bringing the policy rate down to 11% from previous highs of 21.5%. Ali Nawaz notes that this monetary easing is expected to push significant liquidity out of fixed-income securities like T-bills and Pakistan Investment Bonds directly into the equity market, supporting sustained buying pressure.
Corporate Earnings Recovery Signals Strength
Ali Nawaz emphasizes that corporate earnings have risen sharply over the last four to five years, but these earnings were not previously reflected in share prices due to various global and local challenges. However, as economic conditions stabilize, companies’ share prices are now better reflecting their underlying corporate earnings. Earnings growth is projected at 14% excluding banks and oil & gas exploration companies, and 9.2% overall, indicating robust profitability improvement across sectors.
Domestic Liquidity: The Foundation of the Rally
The PSX rally has been primarily driven by strong domestic participation, particularly from mutual funds, individuals, and companies. In fiscal year 2025, domestic inflows constituted an impressive 93% of total market volume. Ali Nawaz highlights that mutual funds alone contributed $233 million in net inflows. This domestic participation pattern is expected to continue in 2026, supported by falling fixed-income yields encouraging institutional and retail investors to shift capital toward equities.
Attractive Valuations Create Opportunity
The market currently trades at a forward price-to-earnings ratio of 6.8x, significantly below the 10-year historical average of 8.0x. This undervaluation suggests substantial re-rating potential that could attract significant international capital flows from emerging and frontier market funds. Ali Nawaz points out that despite the market making historic records, it remains trading at a discount compared to its 2017 peak, indicating room for significant appreciation.
Key Sectors Positioned for Growth
Ali Nawaz and Chase Securities identify several sectors as particularly well-positioned for 2026 growth. Banking sector companies are expected to benefit from strong deposit bases and better spreads as interest rates decline. Energy and oil & gas exploration companies should capitalize on improved global conditions and project financing. Cement, steel, and cyclical sectors are positioned to benefit from improved demand and economic recovery momentum.
Dividend Yields Support Long-term Investors
One compelling reason for PSX investment is the attractive dividend yield potential. The market continues to offer yields in the 9-20% range across various stocks, making dividend income a significant component of total returns. This makes PSX attractive for income-focused investors alongside capital appreciation opportunities.
Market Challenges and Risk Factors
While the outlook remains overwhelmingly positive, Ali Nawaz acknowledges certain challenges. External account pressures, including widening trade deficits and foreign outflows, remain concerns. The market’s continued dependence on IMF reforms and political stability introduces execution risk. Additionally, sector-specific challenges in areas like E&P payouts, cement utilization, and textile export incentives may create periodic volatility.
Latest Market Momentum: October 2025 Update
As of late October 2025, the KSE-100 Index has already reached historic highs of 168,411 points, surpassing many analyst projections. This rally has been supported by successful IMF staff-level agreements, improving corporate earnings reports, and discussions regarding foreign investments from Saudi Arabia. The market has delivered approximately 43.7% returns so far in 2025, making it one of the world’s best-performing equity markets for the year.
Strategic Positioning for 2026
Ali Nawaz recommends investors maintain disciplined asset allocation strategies while taking advantage of current valuations. He suggests focusing on blue-chip dividend stocks for stable income, exploring small and mid-cap opportunities through dedicated research cells, and maintaining portfolio diversification across sectors. The key is balancing aggressive capital appreciation potential with income generation and risk management.
Conclusion: A Pivotal Year Ahead
The outlook for Pakistan’s stock market in 2026 appears exceptionally promising based on Ali Nawaz’s analysis and industry projections. With macroeconomic stability improving, corporate earnings recovering, interest rates declining, and domestic liquidity remaining robust, the PSX is positioned for another significant year of gains. However, success depends on maintaining political stability and continued commitment to IMF reforms.
Investors should approach the market with careful stock selection, proper risk management, and a long-term perspective. The combination of attractive valuations, strong earnings growth, and falling interest rates creates a compelling investment case for both domestic and international capital.
DISCLAIMER:
This article is intended for educational purposes only and should not be considered as financial advice or a recommendation to buy or sell any security. The information contained herein is based on publicly available sources and market research reports. Investors are advised to conduct their own due diligence and consult with qualified financial advisors before making investment decisions. Past performance does not guarantee future results. Stock market investments carry inherent risks including the potential loss of principal. Ali Nawaz and Chase Securities’ opinions represent their market outlook but are subject to change based on evolving economic conditions and market developments.