• Broad money (M3) expanded by 6.2% in April; the highest growth since April 2015

• Higher loan growth in April

• Loan application spiked in April

• Loan approval rate was lower, whilst impaired loan declined

• Expect loans growth in 2018 to be better

Broad money supply (M3) increased by 6.2% yoy in April following a 5.9% increase in the previous month. It was the highest growth since April 2015 (6.5%). Fixed deposit which accounted for 47.9% of the total broad money expanded by 9.1% yoy (Mar: 10.1%) whilst demand deposits slowed to 7.3% yoy (Mar: 7.6%). The significant increase in M3 was also supported by saving deposits which surged by 3.7% yoy in April from 2.2% in March. Nonetheless, the Negotiable Instruments of Deposits (NID) continued posting negative growth since November 2017 (Apr: -22.5%; Mar: - 31.4%). On monthly basis, M3 grew at a moderate pace of 0.1% in April after rose at 1.9% in a month before.

The narrow money supply or M1 eased to 7.5% yoy or RM29.0bn in April, from 7.9% in the preceding month. However, on monthly basis, M1 dropped 0.3% and it marked its fourth consecutive month of negative growth.

Higher loan growth. Loan growth expanded by 4.8% yoy in April from a 4.4% increase in the prior month. The rising loan was propelled by both sectors; business and household. The major business sectors that contributed to the increase were wholesale, retail, restaurants & hotels (Apr: 3.5%; Mar: 2.0%), real estate (Apr: 5.2%; Mar: 5.8%), and construction (Apr: 15.6%; Mar: 15.2%). In addition, manufacturing sector recovered to 1.8% yoy in April after falling for four consecutive months. In contrast, loans to the financing, insurance & business services continue logging negative growth for seventh months in row (Apr: -1.9%; Mar: -1.6%).

Household loans which hold 57.4% of total loans inched up to 5.7% in April after growing at a steady rate of 5.6% in the last two months. The expansion was supported by loans for the purchase of residential property which steadily rose by 8.9% in April. Purchase of residential property holds the highest share over total loan by purpose, accounting for 30.1%. Loan growth for purchase of non-residential property, personal use and credit card also increased in April; by 2.0%, 5.9% and 3.8% respectively. On the flip side, loan for purchase of passenger cars continue registering negative growth since January 2017. It declined 1.0% in April from -1.1% in the previous month. On monthly basis, the total loans growth was stable at 0.4% in April, similar to earlier month’s growth figure.

The annual growth of loan applications spiked to 20.1% yoy in April from 0.02% rise in a month before. The significant increase was due to the broad-based rise in major sectors as well as household sector. Higher loan application in the non-household sector were driven by the real estate which gained extra pace of 100.6% yoy after declining by 11.8% in March. The outstanding growth for loan application was also buttressed by manufacturing (+41.5%), wholesale trade (+67.7%), financial intermediation (+91.9%) and retail trade (+18.6%). Furthermore, the loan application in primary agriculture rallied by 153.3% (Mar: - +31.5%; Feb: -27.0%) after falling for two consecutive months. In a contrast, the construction sector continued to decline in April; by -24.4% yoy.

The loan application for household sector rebounded to 10.1% yoy in April after registering negative growth in March and February 2018. The improvement was primarily supported by the loan application for purchase of residential property which rose by 6.4% yoy following a 11.4% decrease in March. In addition, the loan application for purchase of nonresidential property (20.9%), passenger car (4.9%) and personal uses (32.5%) were also higher in April as compared to the previous month.

On monthly basis, loan application grew by 1.4% in April from 33.0% increase recorded in the prior month. Demand from the household sector rose by 2.5% mom after posting an outstanding 31.8% rise in March. Bulk of the total loan applications came from household sector (54.2%).

Source: BIMB Securities Research - 1 Jun 2018