• Broad money (M3) rose 5.7% in June

• Slightly higher loan growth in June

• Loan application swelled in June; mainly supported by car loan

• Loan approval rate was higher, whilst impaired loan increased

• Expectation on higher car loan applications during 3-month tax holiday

Broad money supply (M3) rose 5.7% yoy in June following a 5.5% increase in the previous month. Fixed deposits, which accounted for 48.2% of the total broad money, were stable at 8.4% yoy for two consecutive months while demand deposits moderated further to 4.4% yoy (May: 5.5%). Moreover, saving deposits eased to 3.0% in June from 3.9% in May. Negotiable Instruments of Deposits (NID) continued posting negative growth for eighth consecutive months (Jun: -10.1%; May: -23.3%). On monthly basis, M3 fell by 0.2% in June from 0.2% rise in the preceding month. It was the first decrease recorded in 2018.

The narrow money supply or M1 slowed to 4.7% yoy or RM18.8bn in June, from 6.7% in May. However, on monthly basis, M1 dropped 0.2% in June after increasing by 0.3% in a month before.

Slightly higher loan growth. Loan growth increased slightly higher to 5.0% yoy in June from 4.9% rise in the prior month. It reached 5.0% growth level in June after 9 months of growth of between 4% to 5% (Sep 17: 5.2%). The increase was mainly prompted by a marginally higher household loan. Household loans, which hold 57.3% of total loans, ticked up 5.8% yoy in June from 5.6% yoy rise in the previous month. The increase was buttressed by loans for the purchase of residential property (+8.3%) which hold the highest share over total loan by purpose, accounting for 30.2%. Loan growth for purchase of non-residential property expanded by 2.6% yoy (May: 2.0%) in June whilst loans for personal use increased by 6.9% yoy (May: 6.1%). Higher household loan in June was also impelled by credit card and purchase of securities which expanded by 2.8% yoy (May: 1.8%) and 6.2% (May: 5.5%) respectively. Other main business sectors that contributed to the higher loan growth in June were wholesale, retail, restaurants & hotels (3.4%), real estate (5.5%) and manufacturing (3.4%). In addition, the loan growth by financing, insurance and business services sector also improved to 1.6% yoy in June after continuously posting negative growth since October 2017.

On monthly basis, total loans surged to 0.7% in June from an increase of 0.3% posted in the earlier month. It was the highest monthly growth since December 2017 (1.1%).

The annual growth of loan applications swelled by 13.3% yoy in June after declining 9.2% in the previous month. The expansion was primarily underpinned by the household sector which surged 9.7% yoy in June after a 11.6% drop in May. The increase in the household sector’s loan application gave significant impact as it accounted 54.7% over total loan application. It was supported by the broad-based increase in loan application for the household sector and the major contributing factor for the higher household sector’s loan in June came from purchase of passenger cars. Passenger cars loan applications spiked 43.5% yoy in June, making it the highest growth in 5 years (Jan 2013: 46.6%). The purchase of residential property, non-residential property, personal uses, credit cards, as well as purchase of consumer durable goods also rallied in June after a substantial fall in May.

The non-household sector also contributed to the significant increase in loan application in June, which was propelled by manufacturing (+45.45), wholesale trade (+53.3%) and real estate (22.1%). Other than those sectors, agriculture sector also showed significant growth of 151.4% yoy in June from 18.5% rise month before.

On a monthly basis, loan application recovered to 6.6% in June from 11.7% decrease logged in the prior month. Demand from the household sector grew by 6.1% mom in June after dropping by 8.6% in May. Bulk of the total loan applications came from household sector (54.7%).

Source: BIMB Securities Research - 1 Aug 2018