• Broad money (M3) growth stayed at 2.9% YoY in September (Aug: 2.9%)
  
  − Growth was supported by a rebound in demand deposits (2.1%; Aug:
  
  -0.5%) and expansion in currency in circulation (1.5%; Aug: 1.2%). But the momentum was capped by a slowdown in fixed deposits (6.3%; Aug: 7.1%) and foreign currency deposits, along with a sustained decline in savings deposits (-5.5%; Aug: -6.3%).
  
  − MoM: expanded (0.6%; Aug: 0.2%) to a seven-month high.

• M3 growth was also attributable to expansion in claims on government and the private sector but partially weighed by the sharp slowdown in foreign assets
  
  − Net claims on government (12.0%; Aug: 10.5%): rose to a sevenmonth high, contributing 1.6 ppts (Aug: 1.4 ppts) to overall growth.
  
  − Claims on the private sector (5.2%; Aug: 5.0%): growth expanded to a two-month high due to an expansion in securities (8.0%; Aug: 7.1%) and loans (4.8%; Aug: 4.7%). This contributed 5.0 ppts (Aug: 4.8 ppts) to the overall M3 growth.
  
  − Foreign assets (2.2%; Aug: 8.7%): moderated sharply to a sevenmonth low.

• Loan growth expanded to a three-month high (4.3% YoY; Aug: 4.2%)
  
  − By purpose: supported by expansion in working capital (1.1%; Aug: 0.4%), contributing to overall growth by 0.3 ppts (Aug: 0.1 ppts). Notably, credit card growth expanded to a threemonth high (13.2%; Aug: 12.7%) and subsequently increase its contribution to 0.3 ppts (Aug: 0.2 ppts). Likewise, growth remained contributed by sustained expansion in residential property (7.2%; Aug: 7.1%), which hit a 10- month high and contributed 2.6 ppts (Aug: 2.6 ppts). Transport vehicles further supported this (9.0%; Aug: 9.1%). Nevertheless, growth was partially capped by weakness in the purchase of securities (-11.2%; Aug: -9.8%), dragging -0.5 ppts (Aug: -0.5 ppts) to overall growth.
  
  − By sector: supported by the household sector (5.6%; Aug: 5.5%), contributing 3.3 ppts (Aug: 3.3 ppts) to overall growth. This was also boosted by a rebound in the manufacturing sector (0.8%; Aug: -1.4%) following a six-month contraction, contributing 0.1 ppts to overall loan growth (Aug: -0.1 ppts). However, overall credit growth was capped by agriculture (-6.5%; Aug: -5.5%) and a sharp slowdown in finance & insurance (10.9%; Aug: 15.3%).
  
  − MoM: Growth expanded (0.8%; Aug: 0.7%), its highest since November 2021.

• Deposit growth moderated (4.3% YoY; Aug: 4.6%) to a 25-month low due to a high base effect, as MoM growth expanded (1.2%; Aug: 0.6%) to a seven-month high
  
  − This is mainly due to a decline in savings deposits (-5.5%; Aug: -6.3%), which contracted since Sep 2022. However, it was partially supported by a rebound in demand deposits (1.7%; Aug: -0.3%), a seven-month high.

• 2023 loan growth forecast retained at 4.0% - 4.5% (2022: 5.7%)
  
  − Loan growth is expected to be supported by further improvement in consumer and business confidence. This is largely backed by a resilient domestic demand, as reflected by a steady labour market conditions underpinned by sustained expansion in the services sector and a gradual increase in tourist arrivals.
  
  − Monetary policy outlook: We expect BNM to hold its overnight policy rate (OPR) steady at 3.00% in its upcoming Thursday meeting. Given the prevailing uncertainty on the growth outlook and the observed stable inflationary trend, we expect BNM’s policy posture to remain unchanged through to 2024, barring unforeseen developments.

Source: Kenanga Research - 1 Nov 2023