Monetary indicators softened in Apr. Narrow money supply (M1) eased to +18.3% YoY (Mar: +19.0% YoY) while broad money supply (M3) moderated to +4.3% YoY (Mar: +6.1% YoY). Meanwhile, total leading loan indicators strengthened due to low base effect. Foreigners continued to be net buyers of local bonds and net sellers of equities.

DATA HIGHLIGHTS

Monetary indicators softened in Apr. Narrow money supply (M1) eased to +18.3% YoY (Mar: +19.0% YoY) while broad money supply (M3) moderated to +4.3% YoY (Mar: +6.1% YoY). Reserve money also grew at a moderate pace (+5.7% YoY; Mar: +6.4% YoY). Meanwhile, total leading loan indicators strengthened owing to low base effect during MCO 1.0, which pushed up growth in loan applications (+92.1% YoY; Mar: +43.9% YoY), approvals (+96.4% YoY; Mar: +34.0% YoY) and disbursements (+58.5% YoY; Mar: +29.6% YoY).

Deposits moderated to +4.6% YoY (Mar: +5.9% YoY) following softer growth in household deposits (+5.2% YoY; Mar: +6.6% YoY) which offset higher business deposits (+3.2% YoY; Mar: +2.9% YoY). Foreign deposits sustained at +5.8% YoY (Mar: +5.8% YoY).

The household loan-deposit gap widened as MoM growth sustained for household loans (+0.4%; Mar: +0.4%) but slowed for household deposits (+0.3%; Mar: +0.7%). On an annual basis, household loans picked up (+6.2% YoY; Mar: +5.7% YoY) while deposits moderated (+5.2% YoY; Mar: +6.6% YoY).

Total loans growth steadied at +3.9% YoY (Mar: +3.9% YoY), supported by higher household loans (+6.2% YoY; Mar: +5.7% YoY) while business loans slowed (+0.4% YoY; +1.1% YoY) mainly reflecting lower growth in loans for working capital purpose (+1.9% YoY; Mar: +2.7% YoY). Meanwhile, gross issuance of corporate bonds fell to RM11.2bn (Mar: RM23.7bn).

Loan applications surged (+92.1% YoY; Mar: +43.9% YoY), driven by household applications (+441.2% YoY; Mar: +82.9% YoY) which offset lower business applications (-10.3% YoY; Mar: +4.9% YoY). Household loan demand was largely boosted by purchase of passenger cars (+1,527.3% YoY; Mar: +103.5% YoY) and residential property (+451.2% YoY; Mar: +103.4% YoY) from a low base. For businesses, most sectors posted lower loan applications with the exception of ‘construction’, ‘real estate’ and ‘education, health & others’ sectors. Meanwhile, loan approvals also spiked (+96.4% YoY; Mar: +34.0% YoY), stemming mainly from household sector (+433.1% YoY; Mar: +55.7% YoY). Approvals for businesses fell - 8.6% YoY (Mar: +12.0% YoY).

The local bond market registered net inflows for the twelfth consecutive month in Apr. Bond inflows expanded +RM6.6bn (Mar: +RM6.2bn) following optimism surrounding FTSE Russell’s decision to retain Malaysia in the WGBI. However, foreigners continued to sell off their equity holdings (-RM1.1bn; Mar: -RM0.1bn).

HLIB’s VIEW

While loan indicators are expected to trend higher in 2Q21 due to low base effect, the imposition of MCO 3.0 from 12th May and subsequent full lockdown from 1st-14th June may impact the growth momentum. In Apr, all loan indicators declined on a MoM basis; applications (-0.7%; Mar: +58.8%), approvals (-3.2%; Mar: +51.6%), disbursements (-12.1%; Mar: +31.8%).

Source: Hong Leong Investment Bank Research - 1 Jun 2021