● M3 growth easedto 4.4% YoYin November (Oct:6.0%), its lowest level since August 2021

- MoM: slowed to a 4-month low of 0.04% (Oct: 0.1%).

- The moderation was due to slower growth in both foreign currency deposits (24.3%; Oct: 34.9%) and demand deposits (2.6%; Oct: 6.5%).

● Attributable to a slowdown in government and private spending, which outweighed slightly higher growth in net external reserves

- Net claims on government (11.6%; Oct: 14.9%): growth decelerated amid an increase in government deposits (23.6%; Oct: 11.8%).

- Claims on the private sector (5.9%; Oct: 6.5%): declined due to a moderation in private sector loans (6.6%; Oct: 7.5%).

- Net external reserves (1.0%; Oct:0.8%): expanded amid an increase in foreign currency reserves held by BNM (4.3%; Oct: 0.3%).

● Loan growth eased toa 6-month low in November (5.5% YoY; Oct:6.5%)

- By purpose: the moderation was primarily driven by slower growth of loans for working capital (5.5%; 8.5%), as well as easing credit growth for the purchase of securities (0.9%; Oct: 3.9%). Nonetheless, loan growth remained underpinned by loans for the purchase of residential property (7.3%; Oct: 7.3%).

- By sector: slower credit growth in the manufacturing sector (0.4%; Oct: 4.2%), transport & storage sector (8.2%; Oct: 21.7%), and the household sector (6.0%; Oct: 6.3%), outweighed an expansion in the information & communication sector (34.1%; Oct: 19.3%).

- MoM: fell into contraction (-0.1%; Oct: 0.6%), for the first time since August 2021.

● Deposit growth moderated to an 8-month low in November (5.9% YoY; Oct: 8.3%), as it registered -0.5% MoM (Oct: 0.4%)

- The slower growth was due to a moderation in demand deposits (3.8%; Oct: 8.0%) and foreign currency deposits (17.9%; Oct: 26.4%).

● 2022 loan growth looks likely to fall within our forecast range of 5.5% - 6.0% (2021: 4.5%)

- As expected, loan growth has lost momentum towards the end of the year as BNM’s cumulative rate hikes begin to dim demand, although it will still register higher than in 2021. For 2023, we forecast loan growth to moderate to between 4.5% - 5.0%, partly in line with our slower GDP growth projection of 4.3% amid the normalisation of economic activities.

- We still expect BNM to raise the overnight policy rate by 25 bps at its next meeting later this month, but only assign a 50.0% chance of another 25 bps hike in March, amid expectations of a global economic slowdown and rising external risks.

Source: Kenanga Research - 3 Jan 2023