Monetary indicators moderated in Jul following softer growth in both narrow money supply (M1) (+9.3% YoY; Jun: +10.8% YoY) and broad money supply (M3) (+5.5% YoY; Jun: +6.6% YoY). Meanwhile, total leading loan indicators strengthened amid higher approvals and applications. Foreigners remained net sellers of local bonds but turned net buyers of equities during the month.

DATA HIGHLIGHTS

Monetary indicators moderated in Jul following softer growth in both narrow money supply (M1) (+9.3% YoY; Jun: +10.8% YoY) and broad money supply (M3) (+5.5% YoY; Jun: +6.6% YoY). Reserve money growth also eased to +10.6% YoY (Jun: +12.4% YoY). Meanwhile, total leading loan indicators strengthened following higher loan applications (+79.8% YoY; Jun: 41.7% YoY) and approvals (+77.1% YoY; Jun: 53.0% YoY). Loan disbursements continued to grow as well, albeit at a softer pace (+25.7% YoY; Jun: +31.7% YoY).

Deposits growth softened to +6.2% YoY (Jun: +6.6% YoY) following moderation across the board; business (+14.1% YoY; Jun: +15.1% YoY), household (+3.2% YoY; Jun: +3.8% YoY) and foreign deposits (+3.5% YoY; Jun: +5.2% YoY).

The household loan-deposit gap widened as monthly household loans continued to expand, albeit at a softer pace (+0.4%; Jun: +0.6%), while deposits continued to fall (-0.3%; Jun: -0.4%). On a YoY basis, household loans gained momentum (+6.1% YoY; Jun: +5.9% YoY), while household deposits slowed (+3.2% YoY; Jun: +3.8% YoY).

Total loans growth picked up to +5.9% YoY (Jun: +5.6% YoY), following the stronger outstanding loans from households (+6.1% YoY; Jun: +5.9% YoY) on the back of higher disbursements for passenger cars, properties and personal use. Business loans increased at a steady pace (+5.8% YoY; Jun: +5.8% YoY), mainly driven by lending to SMEs. Meanwhile, gross issuance of corporate bonds fell to RM8.6bn (Jun: RM13.7bn), following lower issuances in electricity, gas & water, finance, insurance, real estate & business services, as well as government & other services.

Loan applications accelerated (+79.8% YoY; Jun: +41.7% YoY) following stronger applications in both the household (+72.8% YoY; Jun: +48.1% YoY) and the business sector (+87.9% YoY; Jun: +32.5% YoY). Applications for all household purposes rose except for non-residential properties. The strong growth was mainly driven by passenger cars and credit cards. For businesses, growth was mainly supported by agriculture, construction and transportation & storage sectors. Meanwhile, loan approvals also rose (+77.1% YoY; Jun: +53.0% YoY), following stronger growth in the household sector (+120.0% YoY; Jun: +55.4% YoY), despite the slower growth in the business sector (+48.6% YoY; Jun: +50.1% YoY).

Foreigners remained net sellers of local bonds in Jul (-RM3.3bn; Jun: -RM4.1bn) amid rising fears of a potential global economic slowdown following aggressive rate hikes by the Fed. However, foreigners’ appetite for Malaysian equities grew, reflected by an upturn in net equity inflows (+RM0.2bn; Jun: -RM1.3bn).

HLIB’s VIEW

Malaysia’s economic outlook for the remainder of the year remains positive in view of the low base effect and strong domestic demand. However, external headwinds such as a potential global slowdown and spiralling inflation continue to pose downside risks. We maintain our expectation for BNM to raise OPR by another 25bps in Sep.

Source: Hong Leong Investment Bank Research - 1 Sept 2022