Monetary indicators were mixed in Jan following softer narrow money supply (M1) (+2.6% YoY; Dec: +4.3% YoY) and higher broad money supply (M3) growth (+4.4% YoY; Dec: +4.3% YoY). Meanwhile, total leading loan indicators remained bleak amid continued declines in loan applications and approvals. Foreigners turned net buyers of local bonds but remained sellers of equities during the month.

DATA HIGHLIGHTS  

Monetary indicators were mixed in Jan following softer narrow money supply (M1) (+2.6% YoY; Dec: +4.3% YoY) and higher broad money supply (M3) growth (+4.4% YoY; Dec: +4.3% YoY). Reserve money growth moderated to (+26.0% YoY; Dec: +28.2% YoY). Meanwhile, total leading loan indicators remained bleak following continued declines in loan applications (-13.2% YoY; Dec: -16.0% YoY) and approvals (-6.1% YoY; Dec: -15.9% YoY), albeit at a softer pace. Loan disbursements also trended lower (+4.0% YoY; Dec: +8.9% YoY).  

Deposits growth strengthened to +7.0% YoY (Dec: +5.9% YoY) owing to higher business (+9.9% YoY; Dec: +9.7% YoY) and household (+2.4% YoY; Dec: +2.0% YoY) deposits, offsetting the softer foreign deposits (+7.0% YoY; Dec: +8.8% YoY).  

The household loan-deposit gap narrowed as monthly growth of household deposits (+0.8%; Dec: +0.6%) outpaced that of household loans (+0.3%; Dec: +0.6%). On a YoY basis, household deposits picked up (+2.4% YoY; Dec: +2.0% YoY), while household loans (+5.6% YoY; Dec: +5.9% YoY) moderated.  

Total loans growth trended lower (+4.9% YoY; Dec: +5.7% YoY) following a slowdown in business loans growth (+2.0% YoY; Dec: +3.4% YoY), due mainly to slower growth in working capital financing. Household loans growth (+5.6% YoY; Dec: +5.9% YoY) also slowed during the month, following declines in disbursements for non-residential properties and personal uses, as well as moderations in credit card disbursements. Meanwhile, gross issuance of corporate bonds declined to RM4.9bn (Dec: RM42.9bn) owing to lower issuances in finance, insurance, real estate & business services. 

Loan applications continued to fall (-13.2% YoY; Dec: -16.0% YoY), albeit at a softer pace, following declines in applications for both household loans (-18.8% YoY; Dec: -19.1% YoY) and business loans (-2.4% YoY; Dec: -10.5% YoY). For households, applications for passenger cars and properties continued to decline, offsetting the higher applications for personal uses and credit cards. For the business sector, steeper declines were seen in agriculture, manufacturing, and wholesale trade. Similarly, loan approvals also continued to fall (-6.1% YoY; Dec: -15.9% YoY), following declines in household approvals (-12.1% YoY; Dec: -15.9% YoY) despite the rebound in business approvals (+2.7% YoY; Dec: -15.9% YoY).  

Foreigners turned net buyers of local bonds in Jan (+RM0.5bn; Dec: -RM0.8bn) amid optimism over Malaysia’s economic prospects following China’s reopening and anticipation the Fed will take a dovish stand. Nevertheless, foreigners remained net sellers of equity (-RM0.3bn; Dec: -RM1.5bn), however, by a smaller amount.

HLIB’s VIEW

Following weaker global growth and fading of policy support such as EPF withdrawal scheme, as well as decline in loan applications, we maintain our 2023 GDP forecast at 4.0% (2022: 8.7%).

Source: Hong Leong Investment Bank Research - 1 Mar 2023