• Broad money (M3) surged 6.6% in July

• Marginally higher loan growth in July

• Loan application tapered in July; dragged by certain business sectors

• Loan approval rate was lower, whilst impaired loan decreased

• The share of household sector in total loan application at an all-time high mainly driven by purchase of residential property

Broad money supply (M3) surged 6.6% yoy in July from 5.7% recorded in the previous month. It was the highest growth in three years (Mar’15: 7.9%). Fixed deposits, which accounted for 48.3% of the total broad money grew by 8.7% yoy after growing 8.4% in the last two months. Demand deposits ticked up 4.7% yoy in July following 4.4% gain in the last month while saving deposits increased by 3.7% yoy from 3.0% in June. Furthermore, negotiable Instruments of Deposits (NID) posted the first increase in 2018 which rose by 6.5% yoy after eighth months of decline. On monthly basis, M3 rebounded by 0.5% in July (Jun: -0.2%).

The narrow money supply or M1 was stable at 4.7% yoy for two consecutive months. On monthly basis, M1 dropped further by 1.3% in July from -0.2% a month before.

Higher loan growth. Loan growth was up 5.3% yoy in July from 5.0% increase in the preceding month. This was the highest growth since August 2017 (5.8%). The increase was impelled by both, household and business sector. Household loans, which hold 57.4% of total loans, rose 6.0% yoy in July from 5.8% yoy rise in the previous month. This was the first time it reached 6.0% after 2 years (Jun’16: 6.0%). The increase in household loans were mainly supported by loans for the purchase of residential property (+8.3%) which hold the highest share over total loan by purpose, accounting for 30.3%. Loan growth for purchase of non-residential property expanded by 2.4% yoy in July whilst loans for personal use increased by 7.7% yoy. Higher household loan in July was also prompted by credit card and purchase of securities which expanded by 2.8% yoy and 6.8% respectively.

Source: BIMB Securities Research - 3 Sept 2018