• Bank Negara Malaysia (BNM) kept the benchmark Overnight Policy Rate (OPR) unchanged at 3.00% as expected in the final scheduled Monetary Policy Committee (MPC) meeting for 2023.

• Our baseline view is for OPR to remain unchanged at 3.00% until the end of 2024 on the back of 4.5% GDP growth expectation and inflation of 2.5 - 3.5%.

• Malaysia’s headline inflation declined to 1.9% y/y in September 2023, bringing the year-to-date inflation to 2.8% (2022: 3.4%). Core inflation, which excludes volatile items and controlled prices, stagnated at 2.5% y/y. On a year-to-date basis, core inflation stood at 3.3% (2022: 3.0%).

• Our take on CPI – With the slower pressure from the demand-pull inflation and impact from the interest rates normalisation, inflation will continue to remain modest for the remainder of 2023 and in the early part of 2024. For 2023, we expect inflation to be at a range of 2.5% - 3.0%.

• The number of employed persons grew 0.1% m/m or 20.2 million persons in September 2023 to record 16.38 million persons. Unemployed persons continued to decline to 0.6% m/m to 573.7 thousand persons from 577.3 thousand person previously. September’s labour force participation rate (LFPR) remained at 70.1% as of August 2023.

• The unemployment rate in August 2023 stood at 3.4% compared to the previous month. The employment-to-population ratio, which indicates the ability of an economy to create employment, remained at 67.7% as at August 2023. Outside labour force grew 0.09% m/m to 7.23 million persons in August 2023.

• The Industrial Production Index declined by 0.5% y/y in September 2023, from negative 0.3% in the previous month. The decrease in IPI was mainly influenced by the Mining sector that declined to 5.2% over the same period from 0.1% previously. Contrarily, the manufacturing index posted a 0.4% y/y growth in September after three consecutive months of contraction previously. Meanwhile, the electricity sector grew by 2.5% against 1.9% registered in August, sustaining its positive momentum for the fifth consecutive month.

• The domestic-oriented industries accelerated by 5.9% however, the export-oriented industries contracted for the fourth month to 2.0%.

• The sales value of the manufacturing sector decreased at a slower pace of 1.9% y/y in September 2023 (August 2023: -3.3% y/y) to record RM158.7 billion. On month-on-month basis, sales value increased 4.3% as compared to 5.7% recorded in August 2023.

• The sales value of wholesale & retail trade Sales value of wholesale & retail trade in September 2023 registered a growth of 6.5 % y/y to RM142.7 billion, contributed by the positive year-on-year growth in all sub-sectors namely Motor vehicles (7.0%), Retail trade (5.9%) and Wholesale Trade (6.9%).

• Malaysia’s Leading Index (LI) declined 0.5% y/y in August 2023 to 109.7 points compared to 108.9 points in the previous year. Month on month, LI increased by 0.7% compared to -0.8 % previously.

• Meanwhile, the Coincident Index (CI) for the current economic position, grew 2.1 % y/y to 123.6 points in August 2023.

• The Consumer Sentiment Index (CSI) decreased by 8.4 points in the second quarter of 2023 to 90.8 compared to 99.20 in the first quarter 2023.

• Exports: Malaysia’s growth eased 4.4% y/y or RM126.19 billion in October 2023. On a monthly basis, exports recorded 1.5% compared to 8.1% in the previous month. Meanwhile, Domestic exports declined by 5.0% y/y from RM101.6 billion in the same month of the preceding year to RM96.4 billion in October 2023, while re-exports with a value of RM29.8 billion, decreased by 2.2% y/y compared to -18.3 % y/y in the previous month.

• Imports: Imports in October 2023 decreased by 0.2% y/y to RM113.33 billion compared to RM113.52 billion in the same month of the preceding year. On a monthly basis, imports increased by 13.4%. By end use categories for year-on-year basis, Imports of intermediate goods declined to 7.9% while consumption good and capital goods increased by 9.9% and 8.6% respectively.

• Total trade: Total trade contracted to 2.4% y/y to value RM239.5 billion as compared to RM245.5 billion in the same month of the preceding year. The trade surplus in October 2023 declined by 30.3% y/y to RM12.9 billion, recording its 42nd consecutive month of surplus since May 2020.

• Industry total loan growth increased to 4.3% y/y in September 2023 to RM2.08 trillion. Household loan growth increased slightly to 5.6% y/y against 5.5% y/y in the previous month, while non-household loan growth increased to 2.6% y/y compared to 2.2% y/y in the previous month.

• Meanwhile, total deposit for the banking system growth eased to 4.3% y/y in September 2023 (Aug 2023: 4.6%).

• Loan-to-deposit ratio (LD Ratio) for the sector slightly declined to 85.7 % while liquidity coverage ratio (LCR) climbed to 152% (August 2023: 150%). Loan-to-fund-ratio stable at 82.5% (Aug 2023:82.3 %).

• The banking system’s current account saving account (CASA) eased to -0.7% y/y, while CASA ratio registered 29.2% in September 2023 compared to 29.3% previously.

• According to Bank Negara Malaysia (BNM), credit to the private non-financial sector grew by 4.2% y/y as at end September 2023 (Aug 2023: 3.8%), supported by higher growth in credit to businesses.

• The business loans outstanding expanded to 1.6% (Aug 2023: 0.7%), following higher growth in working capital loans for both SMEs and non-SMEs. Meanwhile the outstanding corporate bonds increased to 5.0% (August 2023: 4.4%).

• Outstanding household loan growth edged higher to 5.4% in September 2023, with steady growth registered in most loan purposes.

Source: AmInvest Research - 24 Nov 2023