Monetary indicators were mixed in Jan, following moderate narrow money supply (M1) growth (+9.4% YoY; Dec: +10.4% YoY) and uptick in broad money supply (M3) (+6.5% YoY; Dec: +6.4% YoY). Meanwhile, total leading loan indicators softened following slower growth in loan applications and approvals. Foreigners were net buyers of local bonds and equities during the month.

DATA HIGHLIGHTS

Monetary indicators were mixed in Jan, following moderate narrow money supply (M1) growth (+9.4% YoY; Dec: +10.4% YoY) and uptick in broad money supply (M3) (+6.5% YoY; Dec: +6.4% YoY). Reserve money also moderated to +12.7% YoY (Dec: +14.7% YoY). Meanwhile, total leading loan indicators softened following slower loan applications (+10.0% YoY; Dec: +27.9% YoY) and approvals (+24.4% YoY; Dec: +27.0% YoY). Loan disbursements also continued to ease (+21.5% YoY; Dec: +23.5% YoY).

Slower deposits growth was recorded for the month (+5.8% YoY; Dec: +6.3% YoY), amid moderation in household (+4.5% YoY; Dec: +4.9% YoY) and foreign deposits (+4.3% YoY; Dec: +5.1% YoY), which offset the pickup in business deposits (+11.7% YoY; Dec: +10.5% YoY).

The household loan-deposit gap widened as monthly household loans growth (+0.6%; Dec: +0.7%) outpaced household deposits growth (+0.5%; Dec: +1.0%). On a yearly basis, household loans gained momentum (+4.7% YoY; Dec: +4.3% YoY) while deposits softened (+4.5% YoY; Dec: +4.9% YoY).

Total loans growth increased to +4.7% YoY (Dec: +4.5% YoY), reflecting higher loans from households (+4.7% YoY; Dec: +4.3% YoY) amid higher disbursements for residential property and credit cards. Business loans increased as well (+5.3% YoY; Dec: +5.0% YoY), supported by working capital loans. Meanwhile, gross issuance of corporate bonds decreased to RM4.9bn (Dec: RM9.8bn) following lower issuance in the finance, insurance, real estate & business services sector.

Slower loan applications growth (+10.0% YoY; Dec: +27.9% YoY) was seen in both household (+13.1% YoY; Dec: +25.4% YoY) and business sector (+4.2% YoY; Dec: +32.4% YoY). In the household sector, applications declined for personal use (-13.2% YoY; Dec: -9.6% YoY) and slowed for residential properties (+6.5% YoY; Dec: +33.8% YoY) following the expiry of Home Ownership Campaign. Among business sectors, lower applications were recorded in finance, insurance & business activities, construction and real estate. Meanwhile, loan approvals growth (+24.4% YoY; Dec: +27.0% YoY) softened following slower business loan approvals (+16.5% YoY; Dec: +29.8% YoY), but was partly cushioned by higher household approvals (+29.7% YoY; Dec: +24.8% YoY).

Foreigners were net buyers of local bonds (+RM4.0bn; Dec: +RM6.2bn) and equities (+RM0.4bn; Dec: -RM1.1bn), as signs of economic recovery could have eased some monetary policy tightening concerns by major central banks.

HLIB’s VIEW

Increased financial market volatility could be expected in the near term against the backdrop of intensifying geopolitical tensions, as well as the consequential uncertainty regarding the Federal Reserve’s monetary policy normalisation path. We maintain our expectation for BNM to raise OPR by 25bps in 4Q22.

Source: Hong Leong Investment Bank Research - 2 Mar 2022