Monetary indicators were mixed in Aug following softer narrow money supply (M1) growth (+9.2% YoY; Jul: +9.3% YoY) and higher broad money supply (M3) growth (+6.5% YoY; Jul: +5.5% YoY). Meanwhile, total leading loan indicators were also mixed as loan applications moderated, while approvals trended higher. Foreigners turned net buyers of local bonds and remained net buyers of equities during the month.

DATA HIGHLIGHTS

Monetary indicators were mixed in Aug following softer narrow money supply (M1) growth (+9.2% YoY; Jul: +9.3% YoY) and higher broad money supply (M3) growth (+6.5% YoY; Jul: +5.5% YoY). Reserve money growth moderated to +8.9% YoY (Jul: +10.6% YoY). Meanwhile, total leading loan indicators were also mixed as loan applications moderated (+51.7% YoY; Jul: +79.4% YoY), while approvals trended higher (+81.4% YoY; Jul: +77.7% YoY). Loan disbursements also picked up (+35.8% YoY; Jul: +25.7% YoY).

Deposits growth strengthened to +7.5% YoY (Jul: +6.2% YoY) owing to higher business (+16.0% YoY; Jul: +14.1% YoY) and foreign (+5.3% YoY; Jul: +3.5% YoY) deposits, offsetting the softer household deposits (+2.8% YoY; Jul: +3.2% YoY).

The household loan-deposit gap widened as monthly household loans continued to expand (+0.5%; Jul: +0.4%) while household deposits continued to fall (-0.3%; Jul: -0.3%). On a YoY basis, household loans gained momentum (+6.5% YoY; Jul: +6.1% YoY), while household deposits slowed (+2.8% YoY; Jul: +3.2% YoY).

Total loans growth accelerated to +6.8% YoY (Jul: +5.9% YoY) supported by the stronger household loans growth (+6.5% YoY; Jul: +6.1% YoY), on the back of higher disbursements for non-residential properties and personal use. Business loans also picked up (+6.7% YoY; Jul: +5.9% YoY), mainly driven by the wholesale trade, manufacturing and utilities sectors. Meanwhile, gross issuance of corporate bonds rose to RM12.0bn (Jul: RM8.6bn) mostly concentrated in finance, insurance, real estate & business services, as well as transport, storage & communications.

Loan applications moderated (+51.7% YoY; Jul: +79.4% YoY), dragged by a slowdown in business loan applications (+25.7%; Jul: +87.1% YoY), while applications in the household sector picked up (+81.0% YoY; Jul: +72.8% YoY). Applications for all household purposes accelerated except for passenger cars which saw a moderation. For the business sector, lower applications were recorded mostly in education & health, transportation & storage, as well as electricity, gas & others . Meanwhile, loan approvals ticked higher (+81.4% YoY; Jul: +77.7% YoY) following stronger growth in the business sector (+63.1% YoY; Jul: +49.8% YoY), offsetting the slight moderation in the household sector (+113.8% YoY; Jul: +119.8% YoY).

Foreigners turned net buyers of local bonds in Aug (+RM5.5bn; Jul: -RM3.3bn) following investors’ return to emerging markets as inflationary fears abate. Similarly, foreigners’ appetite for Malaysian equities also grew, reflected by the higher net equity inflows (+RM2.0bn; Jul: +RM0.2bn).

HLIB’s VIEW

Domestic growth continues to be supported by the economic reopening and low base effect. Against this backdrop, we expect the growth momentum to sustain into 3Q22 before moderating thereafter, as base effect dissipates. We maintain our expectation for GDP to record +6.5% YoY in 2022.

Source: Hong Leong Investment Bank Research - 3 Oct 2022