Monetary indicators moderated in Nov. Narrow money supply (M1) slowed to +3.8% YoY (Oct: +6.7% YoY) while broad money supply (M3) moderated to +4.4% YoY (Oct: +6.0% YoY). Meanwhile, total leading loan indicators weakened amid a drop in loan applications and slowdown in approvals. Foreigners remained net sellers of local bonds and equities during the month.

DATA HIGHLIGHTS

Monetary indicators moderated in Nov. Narrow money supply (M1) slowed to +3.8% YoY (Oct: +6.7% YoY) while broad money supply (M3) moderated to +4.4% YoY (Oct: +6.0% YoY). However, reserve money expanded by a stronger +10.3% YoY (Oct: +8.4% YoY). Meanwhile, total leading loan indicators weakened following a drop in loan applications (-9.8% YoY; Oct: +12.6% YoY) and slowdown in approvals (+19.9% YoY; Oct: +24.8% YoY). Loan disbursements, however, trended higher (+13.8% YoY; Oct: +13.4% YoY).  

Deposits growth slowed pace (+5.9% YoY; Oct: +8.3% YoY), following a moderation in both business (+11.0% YoY; Oct: +15.6% YoY) and foreign (+10.7% YoY; Oct: +11.3% YoY) deposits, offsetting the slight pickup in household deposits (+2.4% YoY; Oct: +2.2% YoY).  

The household loan-deposit gap widened as monthly growth of household loans (+0.5%; Oct: +0.5%) outpaced that of household deposits (+0.3%; Oct: -0.4%). On a YoY basis, household deposits accelerated (+2.4% YoY; Oct: +2.2%), while household loans (+6.0% YoY; Oct: +6.3% YoY) slowed.  

Total loans growth trended lower (+5.5% YoY; Oct: +6.5% YoY) following a slowdown in business loans growth (+3.4% YoY; Oct: +5.2% YoY), due mainly to the strong growth in repayments among large firms. Household loans growth (+6.0% YoY; Oct: +6.3% YoY) also slowed during the month, following slower disbursements across most purposes, except for residential properties which saw a pickup. Meanwhile, gross issuance of corporate bonds fell to RM9.4bn (Oct: RM16.4bn), owing to lower issuances in finance, insurance, real estate & business services.  

Loan applications dipped (-9.8% YoY; Oct: +12.6% YoY), following a steeper decline in household loans applications (-18.4% YoY; Oct: -7.0% YoY), coupled with slower business applications (+4.0% YoY; Oct: +49.4% YoY). For households, the dip mainly stemmed from a decline in applications for passenger cars and residential properties, while other purposes saw moderations. For the business sector, apart from manufacturing and construction, declines and moderations in application growth was seen across the board. Meanwhile, loan approvals slowed pace (+19.9% YoY; Oct: +24.8% YoY), owing to the decline in household approvals (-13.0% YoY; Oct: +2.8% YoY) despite the higher business approvals (+70.7% YoY; Oct: +48.4% YoY).  

Foreigners remained net sellers of local bonds in Nov (-RM1.3bn; Oct: -RM6.2bn) amid the deteriorating global economic conditions and high financial volatility. Similarly, foreigners also continued reducing their holdings of equity (-RM0.3bn; Oct: -RM0.6bn) during the month.

HLIB’s VIEW

Following the absence of base effect and the weaker external environment, we project Malaysia’s GDP to moderate to +4.0% YoY in 2023 (2022f: +8.2% YoY). We also maintain expectation for BNM to increase OPR by another 25bps in Jan 2023.

Source: Hong Leong Investment Bank Research - 3 Jan 2023