Monetary indicators strengthened in Apr. Narrow money supply (M1) expanded by +9.5% YoY (Mar: +7.8% YoY) while broad money supply (M3) grew +6.5% YoY (Mar: +5.5% YoY). Meanwhile, total leading loan indicators were mixed as loan applications declined amid stronger loan approvals growth. Foreigners remained net sellers of local bonds but net buyers of equities during the month.

DATA HIGHLIGHTS

Monetary indicators strengthened in Apr. Narrow money supply (M1) expanded by +9.5% YoY (Mar: +7.8% YoY) while broad money supply (M3) grew +6.5% YoY (Mar: +5.5% YoY). Reserve money growth accelerated (+15.6% YoY; Mar: +8.5% YoY) following increase in currency in circulation and required reserves. Meanwhile, total leading loan indicators were mixed as loan applications fell (-0.5% YoY; Mar: +5.1% YoY) amid stronger loan approvals (+19.1% YoY; Mar: +13.4% YoY). Loan disbursements also accelerated (+25.7% YoY; Mar: +11.8% YoY).

Deposits accelerated to +6.2% YoY (Mar: +5.2% YoY), following higher household (+6.5% YoY; Mar: +3.5% YoY) and foreign (+4.3% YoY; Mar: +0.9% YoY) deposits, offsetting slight moderation in business deposits (+12.2% YoY; Mar: +12.5% YoY).

The household loan-deposit gap narrowed as MoM growth of household deposits (+3.2%; Mar: +0.4%) outpaced household loans growth (+0.4%; Mar: +0.5%). On a YoY basis, household deposits growth picked up (+6.5% YoY; Mar: +3.5% YoY), while household loans remained steady (+4.9% YoY; Mar: +4.9% YoY).

Total loans growth increased to +5.0% YoY (Mar: +4.6% YoY) driven by stronger business loans growth (+5.7% YoY; Mar: +4.5% YoY) on the back of continued growth in working capital loans (+8.3% YoY; Mar: +6.3% YoY). Household loans growth was steady (+4.9% YoY; Mar: +4.9% YoY), as higher loan disbursements were seen for purchase of non-residential properties and credit card spending.

Meanwhile, gross issuance of corporate bonds rose to RM13.3bn (Mar: RM12.4bn).

Loan applications declined -0.5% YoY (Mar: +5.1% YoY), following a decrease in household loan applications (-4.7% YoY; Mar: +0.1% YoY) and a moderation in business loan applications (+6.8% YoY; Mar: +13.7% YoY). For households, the dip mainly stemmed from residential properties and personal use, while applications for passenger cars and non-residential properties slowed. Business loan applications were mainly supported by real estate and transport, storage & communication subsectors. Meanwhile, loan approvals accelerated (+19.1% YoY; Mar: +13.4% YoY), driven by growth in the business sector (+42.9% YoY; Mar: +14.4% YoY) which offset softer growth in the household sector (+6.0% YoY; Mar: +12.7% YoY).

Foreigners remained net sellers of local bonds in Apr, albeit by a smaller magnitude (-RM1.7bn; Mar: -RM3.7bn), on expectations of more aggressive rate hikes by the Federal Reserve. Meanwhile, a smaller inflow of equities were recorded during the month (+RM0.8bn; Mar: +RM3.2bn).

HLIB’s VIEW

While the outlook for domestic growth remains strong, there is rising uncertainty on the global front. At the same time, there continues to be upside risk to inflation from supply-related pressures. Hence, we maintain our expectation for BNM to raise OPR by 50bps in 2H22.

Source: Hong Leong Investment Bank Research - 1 Jun 2022