Monetary indicators strengthened in Jan. Narrow money supply (M1) and broad money supply (M3) expanded by +19.1% YoY (Dec: +15.7% YoY) and +4.3% YoY (Dec: +4.0% YoY) respectively. Meanwhile, total leading loan indicators softened during the month. Foreigners remained net buyers of local bonds but continued to sell off equity holdings.

DATA HIGHLIGHTS

Monetary indicators strengthened in Jan. Narrow money supply (M1) and broad money supply (M3) expanded by +19.1% YoY (Dec: +15.7% YoY) and +4.3% YoY (Dec: +4.0% YoY) respectively. The decline in reserve money eased to -13.7% YoY (Dec: -16.1% YoY). Meanwhile, total leading loan indicators softened amid moderation in loan applications (+9.7% YoY; Dec: +12.3% YoY) and lower loan approvals (-3.5% YoY; Dec: -0.1% YoY). However, loan disbursements rebounded by +8.7% YoY (Dec: -2.5% YoY), driven by disbursements in the business sector.

Deposits grew +5.0% YoY (Dec: +4.5% YoY), supported by uptick in household deposits (+6.7% YoY; Dec: +6.6% YoY) which offset the decrease in foreign (-1.0% YoY; Dec: -4.3% YoY) and business deposits (-0.2% YoY; Dec: -0.04% YoY).

The household loan-deposit gap narrowed as household loans growth slowed to +0.2% MoM (Dec: +0.6% MoM) while deposits picked up (+0.8% MoM; Dec: +0.2% MoM). On an annual basis, household loans eased slightly (+4.9% YoY; Dec: +5.0% YoY) while deposits edged higher (+6.7% YoY; Dec: +6.6% YoY). Total loans growth rose +3.8% YoY (Dec: +3.4% YoY), propped up by higher business loans (+1.5% YoY; Dec: +0.5% YoY) amid slightly softer household loans (+4.9% YoY; Dec: +5.0% YoY). The growth in business loans was mainly contributed by the SME segment. Meanwhile, gross issuance of corporate bonds dropped to RM2.5bn (Dec: RM8.5bn).

Loan applications moderated (+9.7% YoY; Dec: +12.3% YoY) as business applications fell (-15.7% YoY; Dec: -4.5% YoY) while household applications continued to rise (+30.6% YoY; Dec: +24.6% YoY). Loan applications declined across most business sectors, with the exception of construction and primary agriculture sectors. Household applications were primarily driven by loans for residential properties (+61.7% YoY; Dec: +34.3% YoY). Meanwhile, loan approvals were lower for the month (-3.5% YoY; Dec: -0.1% YoY) due to lower business loan approvals (-17.5% YoY; Dec: -13.4% YoY) amid moderation in household loan approvals (+8.8% YoY; Dec: +14.1% YoY).

Foreign holdings of local bonds slightly eased in Jan (+RM3.5bn; Dec: +RM3.6bn), marking the ninth consecutive month of bond inflows following investors’ continued search for yield. However, foreigners continued to sell off equity holdings (-RM0.8bn; Dec: -RM0.6bn).

HLIB’s VIEW

DOSM’s latest Business Tendency Statistics showed that businesses are still pessimistic about their performance in 1Q21 amid MCO2.0. The confidence indicator worsened to -11.3% for 1Q21 (4Q20: -10.8%), although it is still higher than MCO1.0 in 2Q20, when the indicator dropped to -25.2%. Nevertheless, this could lead to weaker business loan demand as businesses may hold back on their spending plans until successful virus containment is achieved. Maintain 2021 GDP forecast at +5.0%.

Source: Hong Leong Investment Bank Research - 8 Mar 2021