• M3 growth edged lower to a 9-month low in December (4.0%; Nov: 5.2%), partly due to a higher base effect
  • MoM: increased marginally (0.3%; Nov: 0.0%).
  • Attributable to a moderation in M1 growth (15.7%; Nov: 20.0%) and a further slowdown in narrow quasi-money growth (1.1%; Nov: 1.4%).
• Led by softer growth in both the private sector and in public spending
  • Claims on the private sector (3.5%; Nov: 4.0%): eased for the second consecutive month, largely due to a continued slowdown in private sector loans (3.2%; Nov: 3.6%).
  • Net claims on government (29.9%; Nov: 37.7%): expansion slowed to a 10-month low, attributable to a substantial rise in government deposits (14.5%; Nov: -14.8%).
• Loan growth moderated to 3.4% (Nov: 3.8%), an almost 17-year low
  • By purpose: due to a decrease in loan growth for working capital (0.5%; Nov: 0.8%), construction (1.2%; Nov: 4.3%), the purchase of non-residential property (1.5%; Nov: 2.0%), and for other purposes (-0.6%; Nov: 3.2%).
  • By sector: attributable to the manufacturing sector experiencing negative credit growth for the first time in 33 months (-1.0%; Nov: 3.0%), a 10-month low loan growth for the finance, insurance & business activities sector (- 0.8%; Nov: 1.6%), and slowing growth for the education, health & others sector (29.7%; Nov: 36.3%).
  • MoM: increased after falling into contraction (0.3%; Nov: -0.1%), amid a slightly lower weighted average lending rate of commercial banks (3.508%; Nov: 3.510%).
• Deposit growth marginally higher at 4.5% (Nov: 4.4%)
  • Rising growth in repurchase agreements (43.5%; Nov: 21.9%), foreign currency deposits (8.5%; Nov: 4.0%), and other deposits (4.4%; Nov: 1.3%), outweighed a slowdown in growth for demand deposits (16.7%; Nov: 21.7%).
• Loan growth is projected to register between 3.0% - 4.0% in 2021 (2020: 3.4%; 2019: 3.9%), with an expected deceleration in growth through 1H21, followed by a modest improvement in 2H21
  • With GDP growth estimated to recover in 2021 (3.9%; 2020F: -5.3%) we expect loan growth to remain modest this year. Vaccine distribution will likely support a recovery in both domestic and external sectors through 2H21, but downside risks remain as local COVID-19 cases have been on the rise, even with parts of the country under a renewed Movement Control Order (MCO).
  • On the back of additional fiscal stimulus measures and the imminent rollout of COVID-19 vaccines, we see a higher probability that Bank Negara Malaysia will keep the overnight policy rate unchanged at 1.75%.

Source: Kenanga Research - 2 Feb 2021