Monetary indicators strengthened in Oct. Narrow money supply (M1) expanded by +6.7% YoY (Sep: +6.0% YoY), while broad money supply (M3) grew +6.0% YoY (Sep: +5.7% YoY). Meanwhile, total leading loan indicators softened as both loan applications and approvals moderated. Foreigners remained net sellers of local bonds and equities during the month.

DATA HIGHLIGHTS

Monetary indicators strengthened in Oct. Narrow money supply (M1) expanded by +6.7% YoY (Sep: +6.0% YoY), while broad money supply (M3) grew +6.0% YoY (Sep: +5.7% YoY). Reserve money also continued to expand (+8.4% YoY; Sep: +8.7% YoY), albeit at a softer pace. Meanwhile, total leading loan indicators softened following a moderation in loan applications (+12.8% YoY; Sep: +34.1% YoY) and approvals (+17.5% YoY; Sep: +37.7% YoY). Loan disbursements also moderated (+13.4% YoY; Sep: +14.2% YoY).  

Deposits growth picked up (+8.3% YoY; Sep: +7.4% YoY), on the back of higher business (+15.6% YoY; Sep: +14.4% YoY) and foreign (+11.3% YoY; Sep: +5.4% YoY) deposits, offsetting the moderation in household deposits (+2.2% YoY; Sep: +2.6% YoY).  

The household loan-deposit gap widened as monthly household deposits fell (-0.4%; Sep: +0.3%), while household loans grew (+0.5%; Sep: +0.6%). On a YoY basis, both household deposits (+2.2% YoY; Sep: +2.6% YoY) and household loans (+6.3% YoY; Sep: +6.6% YoY) slowed.  

Total loans growth trended higher at +6.5% YoY (Sep: +6.4% YoY), driven by stronger business loans growth (+5.5% YoY; Sep: +5.2% YoY), particularly for SMEs. This offset the slower household loans growth (+6.3% YoY; Sep: +6.6% YoY), following slower disbursements across most purposes, except for non-residential properties which saw a pickup. Meanwhile, gross issuance of corporate bonds rose to RM16.4bn (Sep: RM9.1bn), mostly concentrated in finance, insurance, real estate & business services, as well as in manufacturing.  

Loan applications moderated (+12.8% YoY; Sep: +34.1% YoY), following a decline in household loan applications (-6.9% YoY; Sep: +21.1% YoY), alongside slower growth in business applications (+49.9% YoY; Sep: +53.1% YoY). For households, the dip mainly stemmed from a decline in applications for passenger cars and residential properties. For the business sector, growth was recorded in most sectors except for in water supply, waste management & remediation activities, and wholesale & retail trade. Meanwhile, loan approvals also slowed pace (+17.5% YoY; Sep: +37.7% YoY), following slower approvals in both the household (+2.7% YoY; Sep: +35.7% YoY) and business sector (+33.4% YoY; Sep: +39.2% YoY).  

Foreigners remained net sellers of local bonds in Oct (-RM6.2bn; Sep: -RM0.6bn) amid tighter global monetary and financial conditions, couple d with the resulting ringgit weakness. Similarly, foreigners continued reducing their holdings of equity (-RM0.6bn; Sep: -RM1.6bn) during the month.

HLIB’s VIEW

Following higher cost pressures, we see households drawdown on their deposit savings, presumably to support consumption activity. While we expect a moderation in 4Q22, we expect growth to remain supported by global activity, albeit at a slower pace, and domestic demand. We maintain our expectation for GDP to grow by +8.2% YoY in 2022.

Source: Hong Leong Investment Bank Research - 2 Dec 2022