Monetary indicators were mixed in Nov. Narrow money supply (M1) expanded by +20.0% YoY (Oct: +19.2% YoY), while broad money supply (M3) growth slightly moderated (+5.2% YoY; Oct: +5.3% YoY). Meanwhile, total leading loan indicators weakened during the month. Foreigners continued to sell off their holdings of equity but increased holdings of local bonds, albeit at a slower pace.

DATA HIGHLIGHTS

Monetary indicators were mixed in Nov. Narrow money supply (M1) continued to expand (+20.0% YoY; Oct: +19.2% YoY), while broad money supply (M3) growth slightly moderated (+5.2% YoY; Oct: +5.3% YoY). Reserve money declined at a slower pace (-15.2% YoY; Oct: -19.7% YoY). Meanwhile, total leading loan indicators weakened for the month following lower loan applications (-5.1% YoY; Oct: -6.1% YoY), approvals (-4.2% YoY; Oct: +0.8% YoY) and disbursements (-1.1% YoY; Oct: +1.5% YoY).

Deposits growth steadied at +4.4% YoY (Oct: +4.4% YoY) amid pickup in business (+1.8% YoY; Oct: 0.0% YoY) and foreign deposits (+1.3% YoY; Oct: +0.4% YoY), which offset the slight moderation in household deposits (+7.1% YoY; Oct: +7.3% YoY).

The household loan-deposit gap widened due to higher monthly growth in household loans (+0.4% MoM; Oct: +0.3% MoM) amid softer household deposits growth (0.1% MoM; Oct: +0.4% MoM). On an annual basis, both household loans (+5.0% YoY; Oct: +5.1% YoY) and deposits (+7.1% YoY; Oct: +7.3% YoY) recorded a slight moderation.

Total loans growth eased to +3.8% YoY (Oct: +4.3% YoY) following softer household loans growth (+5.0% YoY; Oct: +5.1% YoY) as well as business loans growth (+1.2% YoY; Oct: +2.5% YoY). Meanwhile, gross issuance of corporate bonds edged higher at RM16.6bn (Oct: RM16.2bn).

Loan applications decreased at a slower pace (-5.1% YoY; Oct: -6.1% YoY), cushioned by stronger household loan applications (+21.7% YoY; Oct: +11.2% YoY) amid steeper decline in business loan applications (-30.1% YoY; Oct: -26.1% YoY). In the household sector, loan demand surged for passenger cars (+31.8% YoY; Oct: +17.4% YoY) and residential properties (+27.3% YoY; Oct: +19.5% YoY). For businesses, most sectors recorded weaker growth in loan applications, with the exception of manufacturing, electricity, gas & water supply and mining & quarrying sectors. Meanwhile, loan approvals fell by -4.2% YoY (Oct: +0.8% YoY), as the steeper decline in business loan approvals (-20.6% YoY; Oct: -8.6% YoY) offset the acceleration in household loan approvals (+12.3% YoY; Oct: +7.7% YoY).

Foreigners continued to sell off their holdings of equity in Nov (-RM1.0bn; Oct: - RM0.7bn) but increased their holdings of local bonds, albeit at a slower pace (+RM2.5bn; Oct: +RM8.9bn). This marks the seventh straight month of bond inflows.

HLIB’s VIEW

Going into 2021, business loan applications are expected to remain muted as they remain cautious about their spending plans owing to the uncertainty surrounding developments of the pandemic. We expect BNM to maintain OPR at the current level as the growth outlook remains exposed to downside risks from further resurgence of Covid-19 cases resulting in prolonged movement restriction measures.

Source: Hong Leong Investment Bank Research - 4 Jan 2021