Monetary indicators strengthened in Nov. Narrow money supply (M1) expanded by +10.5% YoY (Oct: +7.8% YoY) while broad money supply (M3) grew +6.2% YoY (Oct: +4.6% YoY). Meanwhile, total leading loan indicators also strengthened following higher loan applications and approvals amid a recovery in economic activity. Foreigners remained net buyers of local equities but turned net sellers of bonds.

DATA HIGHLIGHTS

Monetary indicators strengthened in Nov. Narrow money supply (M1) expanded by +10.5% YoY (Oct: +7.8% YoY) while broad money supply (M3) grew +6.2% YoY (Oct: +4.6% YoY). Reserve money growth eased slightly (+14.0% YoY; Oct: +14.3% YoY). Meanwhile, total leading loan indicators strengthened, as loan applications (+21.5% YoY; Oct: +4.2% YoY) and approvals (+15.3% YoY; Oct: +2.2% YoY) increased. Loan disbursements growth also trended higher (+31.3% YoY; Oct: +25.5% YoY).

Deposits rose +6.4% YoY (Oct: +4.4% YoY), driven by higher deposits across businesses (+9.4% YoY; Oct: +6.8% YoY), households (+4.1% YoY; Oct: +4.0% YoY) and foreigners (+3.8% YoY; Oct: +1.2% YoY).

The household loan-deposit gap widened as household loans growth (+0.8%; Oct: +0.7%) outpaced household deposits (+0.2%; Oct: -0.04%) on a monthly basis. On an annual basis, household loans and deposits grew +4.1% YoY (Oct: +3.7% YoY) and +4.1% YoY (Oct: +4.0% YoY) respectively.

Total loans growth increased to +4.3% YoY (Oct: +3.3% YoY) following higher household loans (+4.1% YoY; Oct: +3.7% YoY), amid higher loan disbursements for purchase of residential properties and passenger cars, as well as for credit card spending. Business loans growth also increased (+4.8% YoY; Oct: +3.1% YoY), supported by continued growth in working capital loans. Meanwhile, gross issuance of corporate bonds rose to RM11.6bn (Oct: RM8.1bn), contributed by rated corporate, quasi-government and Cagamas bonds.

Loan applications accelerated to +21.5% YoY (Oct: +4.2% YoY), driven by both household (+25.7% YoY; Oct: +11.3% YoY) and business sector (+14.7% YoY; Oct: -8.1% YoY). Household loan demand was propped up by applications for residential properties and passenger cars, while the demand for businesses were supported by most sectors, excluding agriculture, mining, manufacturing and real estate. Meanwhile, loan approvals also accelerated (+15.3% YoY; Oct: +2.2% YoY) for both households (+13.6% YoY; Oct: -5.1% YoY) and businesses (+17.8% YoY; Oct: +13.9% YoY).

Foreigners remained net buyers of local equities (+RM0.1bn; Oct: +RM1.6bn) but turned net sellers of bonds after three consecutive months of inflows (-RM3.6bn; Oct: +RM2.4bn). This could be attributed to the increasing prospect of policy tightening by the Federal Reserve.

HLIB’s VIEW

While a recovery is expected in 2022, consumers and businesses may remain cautious in their spending plans due to the prevalence of Covid-19 and its evolving strains. We expect BNM to be patient in maintaining its supportive monetary policy stance and continue to forecast a 25bps increase to OPR in 4Q 2022.

Source: Hong Leong Investment Bank Research - 3 Jan 2022