Ghana stocks may extend gains in 2021 of more than 30%, snapping three years of declines, as falling returns in the local fixed-income market draw investors to equities, according to an official from the markets regulator.

Stocks are set to be the biggest beneficiaries of the drop of 130 basis points in benchmark 91-day Treasury bill rates since the year started, coupled with a dearth of initial public offerings or fresh corporate debt sales, Jacob Aidoo, head of issuers at Ghana’s Securities and Exchange Commission, said in an interview.

The fallout from a two-year clean-up of the financial sector pushed the Ghana Stock Exchange Composite Index into retreat in 2018 and 2019, while the pandemic dashed hopes of a rebound last year. Sentiment has improved as investors expect the government to be able to reduce borrowing as the economy starts to recover, Aidoo said.

“The bull run may continue because Treasury bill rates are falling,” he said. “The fiscal deficit is lower and people are confident that the economy will remain stable, so even the government is able to raise what it wants at the longer-end of the yield curve.”

IPOs, share sales and new corporate debt offerings are lacking because companies have put expansion plans on hold, Aidoo said. While the government forecasts economic growth to reach 5% in 2021 from a 37-year low of 0.4% last year, it remains below the average of 6.8% in the three years prior to the pandemic.

MTN Ghana Ltd.’s plan to sell more shares by doubling the float to 25% from 12.5% may support the market performance further as there is demand among investors for exposure to this sector, he said.

“It is possible the company will sell the shares at a price higher than market,” Aidoo said. “Telecommunications and the pharmaceutical industry were the only industries that gained from the pandemic instead of being derailed by it.”