• Broad money (M3) picked up by 8.0% in October
• Higher loan growth in October; highest growth since April 2017
• Loan application contracted in October
• Lower loan approval rate; impaired loan decreased
• The increase in household debt is reflected in private consumption

Broad money supply (M3) increased by 8.0% yoy in October from 7.2% in the previous month, highest growth since July 2013 (8.3%). The remarkable increase in October was mainly driven by a double-digit growth of foreign currency and other deposits; 18.0% yoy (Sep: 13.7%) and 13.4% yoy (Sep: 6.4%) respectively. The M3 was also supported by fixed deposits which surged by 4.1% yoy following a 3.3% rise in the prior month. On the other hand, the fixed deposit as well as demand deposits slowed to 8.5% (Sep: 8.8%) yoy and 3.2% yoy (Sep: 4.3%) respectively in October. The significant 27.1% decrease in negotiable instruments of deposits (NID) was mitigated by the robust growth in other deposits. On monthly basis, M3 eased to 1.4% in October (Sep: 1.7%).

The narrow money supply or M1 moderated by 3.2% yoy in October from 4.1% recorded in September. On monthly basis, M1 slowed to 0.3% in October after increasing by 0.8% in a month before.

Higher loan growth. Loan growth remained robust and edged up 6.0% yoy in October from 5.7% in the previous month. This was the first time the loan growth reached 6.0% after April 2017 (6.1%). The growth was supported by business sector (Oct: 6.1%; Sep: 5.4%) as the loan growth from major sub-sectors rose significantly in October. Those sectors are wholesale, retail, restaurants & hotels (Oct: 5.9%; Sep: 5.8%), financing, insurance & business services (Oct: 8.2%; Sep: 5.4%), manufacturing (Oct: 8.0%; Sep: 6.3%) and construction (Oct: 16.3%; Sep: 15.6%). In total, these four sectors contributed 25.9% over total loans.

Meanwhile, the loan from household sector inched down to 5.9% yoy in October from 6.0% yoy recorded in a month earlier but maintained its share of 57.3% to total loans. The moderation of growth in household sector was driven by majority of the sub-segments which were tapering off slightly in October namely purchase of residential property (Oct: 7.9%; Sep: 8.0%), purchase of non-residential property expanded (Oct: 1.9%; Sep: 2.0%), purchase of passenger cars (Oct: 0.40%; Sep: 0.43%), purchase of securities (Oct: 7.1%; Sep: 7.3%) and credit card (Oct: 2.7%; Sep: 3.7%).

On monthly basis, total loans were up by 0.3% in October from an increase of 0.6% recorded in the previous month.

The loan applications contracted by 0.4% yoy in October after surging by 6.1% in the prior month. The decline was mainly propelled by the falling demand of loans in construction (- 34.3%), real estate (-44.3%), retail trade (-1.9%), mining & quarrying (-44.3%) and renting & business activities (-51.9%). These five sectors held 13.4% over total loan applications. Furthermore, the loan application growth from manufacturing sector stumbled to 9.2% yoy in October after climbing by 29.6% yoy in the prior month. The moderation of demand by manufacturing sector exacerbated the total application of loans in October as it holds 9.1% of total loan applied. The decline in loan applications in October was also believed to be underpinned by the lagging effect after the reimplementation of SST in September.

In contrast, the loan applications for household sector rebounded by 5.2% yoy in October after declining by 4.2% in a month before. The expansion of loan application growth in October was mainly due to the better demand for purchase of residential property (Oct: 6.6%; Sep: -2.6%), purchase of non-residential property (Oct: 11.1%; Sep: -0.2%), personal uses (Oct: 8.7%; Sep: -2.9%) and credit cards (Oct: 13.7%; Sep: 2.4%). However, we could see an obvious decline in demand for purchase of passenger cars after the end of zerorisation of GST in August. The loan applied from this segment dropped for two consecutive months (Oct: -15.4%; Sep: -20.7%).

On a monthly basis, loan application improved to 6.7% yoy in October after a decrease of 10.9% posted in the prior month. Demand from the household sector rose by double-digit in October, 22.1% yoy following 23.1% slip in September. Bulk of the total loan applications came from household sector (56.5%).

Source: BIMB Securities Research - 3 Dec 2018