• Broad money (M3) growth sustained (6.0% YoY; Dec: 6.0%)
  
  − Driven by a sustained increase in demand (7.8%; Dec: 6.9%) andfixed (4.9%; Dec: 4.7%) deposits. Combined, the two components contributed 3.6 ppts (Dec: 3.4 ppts) to overall M3 growth. However, the momentum was partially capped by moderation in foreign currency deposits (12.4%; Dec: 16.2%) with its contribution to overall growth dropping to 1.3 ppts (Dec: 1.7 ppts).
  
  − MoM: moderated sharply (0.4%; Dec: 1.7%) to a five-month low.

• M3 growth was supported by sustained expansion in net claims on private, followed by foreign assets and government
  
  − Claims on the private sector (5.5%; Dec: 5.6%): down slightly as higher loans (5.4%; Dec: 5.2%) were partially capped by moderate growth in securities (6.7%; Dec: 8.1%). Its contribution to overall M3 remained at 5.4 ppts (Nov: 5.4 ppts), the highest since March 2019.
  
  − Net claims on government (10.9%; Dec: 13.8%): growth moderated as expansion in government claims (7.7%; Dec: 7.5%), weighed by weak government deposits (-6.0%; Dec: -16.4%). Its contribution to overall M3 growth edged down to 1.6 ppts (Dec: 2.0 ppts).
  
  − Foreign assets (8.0%; Nov: 8.8%): moderated slightly, due to slower net foreign assets in the banking system (27.3%; Dec: 37.6%), but was partially capped by the expansion in BNM foreign assets (4.1%; Dec: 3.4%). Its contribution to overall M3 growth edged down to 2.0 ppts (Dec: 2.2 ppt).

• Loan growth surged to a 15-month high (5.7% YoY; Dec: 5.3%)
  
  − By purpose: Higher growth due to an expansion in the major component led by residential property (7.4%; Dec:7.3%), contributing 2.7 ppts (Dec: 2.7 ppts) to overall loan growth. This was followed by higher loans for transport vehicles (10.2%; Dec: 9.7%), with its contribution to overall loan growth expanded to 1.0 ppts (Dec: 0.9 ppt).
  
  − By sector: Driven by a strong expansion in the household sector (6.1%; Dec: 5.8%), contributing 3.6 ppts (Dec: 3.4 ppts) to overall loan growth and a 15-month high. This was also attributed to higher growth for finance & insurance (18.7%; Dec: 16.6%), contributing 0.9 ppt (Dec: 0.8 ppt) to overall growth.
  
  − MoM: Growth expanded (0.3%; Dec: 1.1%) but at a slower pace.

• Deposit growth moderated slightly (5.2% YoY; Dec: 5.6%)
  
  − Largely weighed by a sharp moderation in repurchase agreements (7.9%; Dec: 29.4%), the lowest since April 2021.This was further dragged by persistent weakness in negotiable instruments of deposits issued (-44.1%; Dec: - 28.3%), which hit a record low. Nevertheless, expansion in demand (7.4%; Dec: 6.1%) and fixed (4.3%; Dec: 3.9%) deposits, supported the growth which combined contributed 3.4 ppts (Dec: 3.0 ppts) to overall deposit growth.
  
  − MoM: growth contracted (-0.1%; Dec: 1.3%), lowest in 6 months.

• 2024 loan growth forecast revised up to 5.0% - 5.5%, from 4.5% - 5.0% previously (2023: 5.3%)
  
  − We have slightly raised our 2024 loan growth forecast following the robust performance observed in January andcontinued expansion since 4Q23. This adjustment aligns with the anticipated GDP growth for 2024 of 4.5% - 5.0% (2023: 3.7%), supported by resilient domestic demand and an expected gradual recovery in the manufacturing sector, driven by the technology upcycle and China's economic recovery.
  
  − On the monetary policy front, we continue to expect BNM to keep its overnight policy rate (OPR) unchanged at 3.00% for the rest of 2024 on the back of a stable inflation outlook and a relatively sanguine growth trajectory.

Source: Kenanga Research - 1 Mar 2024