Monetary indicators moderated in Sep following softer expansion of narrow money supply (M1) (+6.0% YoY; Aug: +9.2% YoY) and broad money supply (M3) (+5.7% YoY; Aug: +6.5% YoY). Meanwhile, total leading loan indicators also softened as both loan applications and approvals moderated. Foreigners turned net sellers of local bonds and equities during the month.

DATA HIGHLIGHTS

Monetary indicators moderated in Sep following softer expansion of narrow money supply (M1) (+6.0% YoY; Aug: +9.2% YoY) and broad money supply (M3) (+5.7% YoY; Aug: +6.5% YoY). Similarly, reserve money growth moderated to +8.7% YoY (Aug: +8.9% YoY). Meanwhile, total leading loan indicators also softened following a moderation in both loan applications (+34.1% YoY; Aug: +51.4% YoY) and approvals (+37.3% YoY; Aug: +82.3% YoY). Loan disbursements also moderated (+14.2% YoY; Aug: +35.8% YoY).  

Deposits growth slowed (+7.4% YoY; Aug: +7.5% YoY), owing to softer business (+14.4% YoY; Aug: +16.0% YoY) and household (+2.6% YoY; Aug: +2.8% YoY) deposits, offsetting the pickup in foreign deposits (+5.4% YoY; Aug: +5.3% YoY).  

The household loan-deposit gap widened as MoM growth of household loans (+0.6%; Aug: +0.6%) outpaced that of household deposits (+0.3%; Aug: -0.3%). On a YoY basis, household loans grew at a steady pace (+6.6% YoY; Aug: +6.6% YoY) while household deposits slowed (+2.6% YoY; Aug: +2.8% YoY).  

Total loans growth ticked lower to +6.4% YoY (Aug: +6.8% YoY), dragged by slower business loans growth (+5.2% YoY; Aug: +6.8% YoY), which was partly due to higher base effect. Meanwhile, household loans expanded at a steady pace (+6.6% YoY; Aug: +6.6% YoY) supported by higher disbursements across all purposes, albeit at a softer pace. Meanwhile, gross issuance of corporate bonds fell to RM9.1bn (Aug: RM12.0bn), following lower issuances in finance, insurance, real estate & business services, as well as in manufacturing.  

Loan applications moderated (+34.1% YoY; Aug: +51.4% YoY), owing to slower growth in household loan applications (+21.2% YoY; Aug: +80.9% YoY), which offset the stronger growth in business loan applications (+53.0% YoY; Aug: +25.3% YoY). Applications for all household purposes recorded moderations, particularly for passenger cars. For the business sector, growth was recorded in most sectors except for in mining & quarrying and transportation & storage. Meanwhile, loan approvals also slowed pace (+37.3% YoY; Aug: +82.3% YoY), following slower approvals in both the household sector (+35.7% YoY; Aug: +114.0% YoY) and business sector (+38.6% YoY; Aug: +64.3% YoY).  

Foreigners turned net sellers of local bonds in Sep (-RM0.6bn; Aug: +RM5.5bn) amid the return of global risk-aversion following another 75bps interest rate hike by the Fed. Similarly, foreigners also reduced their holdings of Malaysian equities (-RM1.6bn; Aug: +RM2.0bn).

HLIB’s VIEW

While we expect 3Q22 GDP to record stronger growth owing to the low base effect and better labour market situation, we anticipate the positive growth momentum to ease moving into the end of the year in 4Q22, as base effect dissipates and external conditions weaken. We maintain our expectation for GDP to record +6.5% YoY in 2022.

Source: Hong Leong Investment Bank Research - 1 Nov 2022