Broad money growth flat in September

M3 grew marginally by 0.4% from the 0.1% in August, marking 7 consecutive months of expansion


MALAYSIA’S broad money (M3) growth remained unchanged at 6.4% in September on the back of low interest rates and ongoing fiscal stimulus.

On a month-on-month basis, M3 grew marginally by 0.4% from the 0.1% in August, marking seven consecutive months of expansion.

Kenanga Investment Bank Bhd (Kenanga Research) said M3 growth was attributed to the continued expansion of M1 (money supply) at 18.2% from 17.8% the previous month, backed by further expansion in demand deposits at 18.5%.

Loan growth was unchanged at 4.4%, which, by purpose, is attributable to a slowdown in loan growth for construction at 5.6% and other purposes at 3%.

The firm said it was partially offset by vehicle loans at 3.6%, which marked an almost seven-year high and an 18-month high of housing loans at 7.6%.

By sector, a sharp moderation of loan growth in the electricity, gas and water supply sector to 1.7% from 18.9% in August was counter-balanced by an increase in loans for the household sector to 5.2% from 4.8%.

Kenanga Research noted that deposit growth rose to 5.2% in September from 4.5% in August, a 16-month high as a result of a surge in repurchase agreement at 42.5% and saving deposits at 23.8%, as well as a rebound in other deposits accepted at 3%, which offset a worsening decline in fixed deposits at -2.7%.

The firm said the 2020 loan growth forecast maintained at 1%-2% amid a resurgence in Covid-19 cases.

“The ongoing spike of local Covid-19 infections, which has led to renewed lockdown measures in some areas of the country, will likely impede the ongoing economic recovery.

“In turn, we expect an uneven recovery in confidence among households and businesses which will limit loan growth,” it said in a statement yesterday.

Kenanga Research said it expects Bank Negara Malaysia to maintain the Overnight Policy Rate (OPR) at 1.75%.

It added that there is still room to cut the OPR should the need arise considering the reimplementation of lockdown restrictions and the rise of Covid-19 cases.