• Broad money (M3) was stabled in October

• Loan growth was at the lowest since October 2016

• Loan application spiked in October

• Loan approval rate maintained

• Impaired loan eased in October

• No change to expectations on loans growth

Broad money stood at 5.1% in October from 5.0% in the previous month. Fixed deposit, which contributed 47.7% to the total broad money, grew by 5.9% in October. Demand deposit and saving deposit increased 12.4% and 5.3% respectively in October. The negotiable instruments of deposit (NID) rose significantly at 41.3% in October as compared to 11.7% posted in the preceding month. On monthly basis, the broad money eased in October at 0.6% (Sep: 0.9%).

The narrow money supply or M1 inched up to 11.7% yoy or improved by RM42.2bn in October. Compared to the prior month M1 grew by 11.1%.

Slower loan growth. Loans growth for the banking sector continued to decelerate and grew 4.6% in October (Sep: 5.2%), the lowest since October 2016 (4.5%). This was mainly due to slower growth in loans extended to the corporate sector, notably in wholesale, retail, restaurants and hotels (Sep: 5.3%; Oct: 4.3%), real estate (Sep: 6.7%; Oct: 5.5%), construction (Sep: 10.5%; Oct: 10.0%). The sluggish growth was also contributed by a declining growth in finance, insurance and business service (Sep: 2.0%; Oct: -0.1%).

Household loans growth rose slightly higher in October at 5.1% after maintained at 5.0% for four consecutive months since June 2017. The household sector holds about 57.4% over total loan registered in October. Loan growth for the purchase of residential property inched up to 8.9% in October from 8.8% increase in the prior month. Purchase of non-residential property slowed down to 3.2% from 3.7% in September. Meanwhile purchase of consumer durables declined 8.9% in October after registered a positive growth for nine consecutive months.

On monthly basis, total loans rose marginally lower at 0.1% in October as compared to the previous month’s growth of 0.2%.

The annual growth of loan application spiked to 12.8% in October from 0.5% logged in the previous month. The outstanding growth in October was driven by majority of the sectors which grew significantly higher for the month. The growth of loan application for household sector increased notably by 12.2% in October from 3.1% in the preceding month. Moreover, the loan application for purchase of non-residential property rebounded to 14.6% from -7.8% in September. Loan application for purchase of consumer durable goods also grew remarkably at 4335.0% from 792.6% posted in the earlier month. Besides the household sector, the significant increase in the loan application was also contributed by manufacturing sector as it surged by 53.0% in October from 8.1% increase in September. Furthermore, loan application for construction sector rallied to 46.9% from -12.6% in the preceding month.

On monthly basis, the loan application growth surged to 13.6% from -11.6% registered in September. Demand from the household sector recovered to 11.2% mom after posting a 14.1% decrease in the prior month. Bulk of the total loan applications came from household sector (53.5%).

Source: BIMB Securities Research - 4 Dec 2017