Stocks on the PSE, which is located in Nablus, have climbed 15 per cent since Mahmoud Abbas, the Palestinian president, named his emergency cabinet, Abu Libdeh said.
The market value of the PSE is estimated at around $3bn, slightly above $2.9bn in 2006 but below the peak of $5.4bn, the year before the financial blockade was imposed.
Naser Abdel-Karim, a Palestinian economist, said the market was seeing a "corrective move" and was poised to rebound.
On the up
Abbas, who leads the Palestinian Fatah movement, named a new Palestinian government last week after Hamas fighters routed Fatah and many of its supporters from the Gaza Strip.
"Hamas must decide what their objective is - is it power, is it Israel's destruction, or is it peace for the Palestinian people?
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The fighting has divided control over the Palestinian territories between the West Bank, where Fatah is more dominant and where the stock market is located, and Gaza, where Hamas has greater control.
Hamas, led by Ismail Haniya, the prime minister of the Palestinian unity government, has refused to consider Abbas's new group as the legitimate Palestinian government.
But after Abbas named the new government, headed by Salam Fayyad, a former finance minister, Europe and the US lifted an aid embargo they had imposed when Hamas won elections in 2006.
Reuters quoted Abu Libdeh as saying that the decision to end the 15-month-old embargo, as well as Israel's willingness to pay withheld tax revenues to boost Abbas, encouraged investors to buy stocks.
Investors crowded the bourse on Tuesday, looking to buy shares that had fallen following Hamas's rise to power but were now increasing in value.
"We did not see this activity [on the stock market] for the past 15 months," said Mohammad Siyam, a manager at Sahem Trading, the largest Palestinian investment house.
He said the appointment of Fayyad - a figure liked by Western governments - as prime minister, was reason for optimism in the Palestinian economy.
The PSE, established in 1996, after an interim Palestinian-Israeli peace deal, offers a measure of investor sentiment in the Palestinian territories.