Monetary indicators were mixed in Feb following moderate narrow money supply (M1) growth (+8.6% YoY; Jan: +9.4% YoY) and higher broad money supply (M3) growth (+6.8% YoY; Jan: +6.5% YoY). Meanwhile, total leading loan indicators were also mixed following uptick in loan applications but moderation in approvals. Foreigners remained net buyers of local bonds and equities during the month.

DATA HIGHLIGHTS

Monetary indicators were mixed in Feb following moderate narrow money supply (M1) growth (+8.6% YoY; Jan: +9.4% YoY) and higher broad money supply (M3) growth (+6.8% YoY; Jan: +6.5% YoY). Reserve money moderated to +8.7% YoY (Jan: +12.7% YoY). Meanwhile, total leading loan indicators were also mixed following uptick in loan applications (+13.0% YoY; Jan: +10.0% YoY) and moderation in approvals (+18.0% YoY; Jan: +24.4% YoY). Loan disbursements also continued to ease (+12.3% YoY; Jan: +21.5% YoY).

Deposits growth picked up (+6.5% YoY; Jan: +5.8% YoY) amid higher business deposits (+13.2% YoY; Jan: +11.7% YoY) and steady foreign deposits growth (+4.3% YoY; Jan: +4.3% YoY), which offset moderation in household deposits (+3.8% YoY; Jan: +4.5% YoY).

The household loan-deposit gap widened following continued expansion in household loans growth on a MoM basis (+0.2%; Jan: +0.6%) amid decline in household deposits (-0.2%; Jan: +0.5%). On an annual basis, household loans growth sustained at +4.7% YoY (Jan: +4.7% YoY) while household deposits eased (+3.8% YoY; Jan: +4.5% YoY).

Total loans growth sustained at +4.7% YoY (Jan: +4.7% YoY), supported by steady household loans (+4.7% YoY; Jan: +4.7% YoY) and pickup in business loans growth (+5.5% YoY; Jan: +5.3% YoY). For businesses, growth was driven by higher lending to SMEs and steady working capital loans growth. Meanwhile, gross issuance of corporate bonds decreased to RM3.2bn (Jan: RM4.9bn).

Loan applications picked up (+10.0% YoY; Dec: +27.9% YoY) on the back of higher applications in the household (+13.8% YoY; Jan: +13.1% YoY) and business sector (+11.9% YoY; Jan: +4.2% YoY). In the household sector, applications for most purposes (i.e., passenger cars, residential properties, credit card) continued to expand. For business sectors, growth was most prominent in the manufacturing, construction and wholesale & retail trade subsectors. Meanwhile, the moderation in loan approvals (+18.0% YoY; Jan: +24.4% YoY) mostly stemmed from slowdown in household sector (+8.4% YoY; Jan: +29.7% YoY), which offset the jump in business sector (+34.8% YoY; Jan: +16.5% YoY).

Foreigners remained net buyers of local bonds and equities. Bond flows eased slightly (+RM3.0bn; Jan: +RM4.0bn) while equity flows accelerate d (+RM2.8bn; Jan: +RM0.4bn). This reflected positive investor sentiment given Malaysia’s beneficial position as a net commodities exporter amid higher global commodity prices.

HLIB’s VIEW

Given the continued slack in the domestic economy, increased uncertainty on the global front and relatively manageable inflationary pressures arising mostly from cost push pressures on the supply side, we maintain our expectation for BNM to be cautious and raise OPR by 25bps in 4Q22.

Source: Hong Leong Investment Bank Research - 1 Apr 2022