Monetary indicators were mixed in Jun as narrow money supply (M1) grew +10.8% YoY (May: +9.5% YoY), while broad money supply (M3) eased to +6.6% YoY (May: +6.9% YoY). Meanwhile, total leading loan indicators strengthened following higher loan applications, approvals, and disbursements. Foreigners turned net sellers of both local bonds and equities during the month.

DATA HIGHLIGHTS

Monetary indicators were mixed in Jun as narrow money supply (M1) grew +10.8% YoY (May: +9.5% YoY), while broad money supply (M3) eased to +6.6% YoY (May: +6.9% YoY). Reserve money expanded +12.4% YoY (May: +12.0% YoY). Meanwhile, total leading loan indicators strengthened, following higher loan applications (+41.7% YoY; May: +5.2% YoY), approvals (+53.0% YoY; May: +22.9% YoY) and disbursements (+31.7% YoY; May: +14.0% YoY).

Deposits accelerated to +6.6% YoY (May: +6.1% YoY) driven by stronger foreign (+5.2% YoY; May: +3.8% YoY) and business deposits (+15.1% YoY; May: +12.4% YoY), offsetting the moderation in household deposits (+3.8% YoY; May: +4.7% YoY).

The household loan-deposit gap widened as monthly household loans expanded further (+0.6%; May: +0.3%) while deposits continued to fall (-0.4%; May: -1.7%). On a YoY basis, household loans gained momentum (+5.9% YoY; May: +5.0% YoY) while household deposits slowed (+3.8% YoY; May: +4.7% YoY).

Total loans growth increased to +5.6% YoY (May: +5.0% YoY), reflecting higher outstanding loans from households (+5.9% YoY: May: +5.0% YoY) amid higher disbursements across all loan purposes, particularly for passenger cars and residential properties. Business loans increased as well (+5.8% YoY; May: +5.4% YoY). Meanwhile, gross issuance of corporate bonds increased to RM13.7bn (May: RM4.1bn), with issuances mostly stemming from the electricity, gas & water and finance, insurance, real estate & business services sectors.

Loan applications accelerated (+41.7% YoY; May: +5.2% YoY) on the back of higher applications in both household (+48.1% YoY; May: +4.9% YoY) and business sectors (+32.5% YoY; May: +5.7% YoY). Applications for all household purposes rose, notably for passenger cars, residential property and credit cards. For the business sector, most sectors recorded a rise in loan applications, except agriculture and transport, storage & communication sectors. Meanwhile, loan approvals also accelerated (+53.0% YoY; May: +22.9% YoY), following higher growth in both household (+55.4% YoY; May: +8.2% YoY) and business sectors (+50.1% YoY; +46.7% YoY).

Foreigners turned net sellers of local bonds in Jun (-RM4.1bn; May: +RM0.5bn), induced by fears of a more aggressive monetary policy tightening by the Fed, as well as concerns over a potential global economic slowdown. Similarly, foreigners also reduced their holdings of equity (-RM1.3bn; May: +RM0.1bn).

HLIB’s VIEW

While the optics for domestic growth remain bright, the ongoing geopolitical conflicts and elevated commodity prices continue to cloud the global outlook. Inflationary pressures also continue to mount domestically, following higher food prices. Hence, we maintain our expectation for BNM to raise OPR by another 25bps in Sep, bringing OPR to 2.5% by end-2022.

Source: Hong Leong Investment Bank Research - 1 Aug 2022