● Broad money (M3) rose to a 16-month high (6.0% YoY; Nov: 4.6%)

- Due to a surge in demand deposits (6.9%; Nov: 4.0%) and a rebound in other deposits (9.7%; Nov: -3.0%). Combined, the two contributed 2.3 ppts (Nov: 0.5 ppts) to overall M3 growth. However, the momentum was partially weighed by a moderation in fixed deposits (4.7%; Nov: 6.0%) and a sustained contraction in savings deposits (-1.5%; Nov: -2.6%).

- MoM: surged (1.7%; Nov: 0.9%), highest since March 2018.
 

● M3 growth was boosted by strong expansion in net claims on government, followed by foreign assets and private sector

- Net claims on government (13.8%; Nov: 11.9%): expanded due to higher claims on government (7.5%; Nov: 5.1%). Its contribution to overall M3 growth edged up to 2.0 ppts (Nov: 1.7 ppts).

- Foreign assets (5.9%; Oct: 0.7%): rose to a five-month high due to a surge in net foreign assets in the banking system (37.6%; Nov: 5.7%). Its contribution to overall M3 growth expanded to 2.2 ppts (Nov: 1.0 ppt), a five-month high.

- Claims on the private sector (5.6%; Nov: 5.1%): expanded due to higher loans (5.2%; Nov: 5.0%) and securities (8.1%; Nov: 6.4%). Its contribution to overall M3 expanded to 5.4 ppts (Nov: 5.0 ppts).
 

● Loan growth surged to a 12-month high (5.3% YoY; Nov: 4.9%)

- By purpose: The higher growth was newly attributed to the expansion in the working capital (4.6%; Nov: 3.1%), which reached a nine-month high and contributed 1.0 ppts (Nov: 0.7 ppt) to overall loan growth. This was followed by an expansion in loans for construction (3.1%; Nov: 0.8%), contributing 0.1 ppts to the overall loan growth. Overall, loan growth remained supported by sustained growth in residential property (7.3%; Nov: 7.3%) and transport vehicles (9.7%; Nov: 9.7%), which combined contributed 3.6 ppts to overall loan growth (Nov: 3.6 ppts).

- By sector: Attributable to expansion in finance & insurance (16.6%; Nov: 13.8%) and other sectors (11.0%; Nov: 3.0%), as well as a rebound in mining & quarrying (8.6%; Nov: -3.2%), contributing a combined 0.9 ppts (Nov: 0.7 ppts) to overall loan growth. In addition, household sector growth remained unchanged (5.8%; Nov: 5.8%) for the third straight month, with its contribution to overall loan growth edge down slightly to 3.4 ppts (Nov: 3.5 ppts).

- MoM: Growth expanded (1.1%; Nov: 0.8%) to the highest since April 2018.
 

● Deposit growth increased to a six-month high (5.6% YoY; Nov: 5.3%)

- Supported by higher growth in demand deposits (6.1%; Nov: 3.1%), which contributed 1.2 ppts (Nov: 0.6 ppts) to the overall deposit growth. This was also contributed by higher foreign currency deposits (10.9%; Nov: 9.0%) and the rebound in other deposits accepted (8.4%; Nov: -1.7%), contributed 2.0 ppts (Nov: 0.7 ppts) to deposit growth.

- MoM: growth rose (1.3%; Nov: 0.4%) to a 10-month high.
 

● We maintain our 2024 loan growth forecast at 4.5% - 5.0% (2023: 5.3%)

- No change to our 2024 loan growth forecast for now despite better-than-expected loan growth in 2023 (5.3%; 2022: 5.7%), which beaten our forecast range of 4.5% - 5.0%. This is largely because we expect subsidy rationalisation to affect demand conditions, especially in the 2H24. Nevertheless, we retain the 2024 GDP growth forecast at 4.9% from an estimated 3.5% to 4.0% in 2023 as we believe growth will benefit from the technology upcycle and China's gradual economic recovery. Additionally, we expect BNM to maintain its overnight policy rate (OPR) at 3.00% throughout 2024 on the back of a stable inflation outlook while supporting its growth trajectory.

Source: Kenanga Research - 2 Feb 2024