DOMESTIC financial market adjustments remained orderly in the month of May despite the tightened global financial conditions tightened significantly and more prolonged inflationary pressures.
Bank Negara Malaysia (BNM) monthly highlights showed that notably, the 10-year Malaysian Government Securities (MGS) yield fell by 21 basis points (bps) during the month, supported by foreign portfolio inflows into the domestic bond market.
By contrast, regional bond yields rose by 24.5bps on average.
The ringgit depreciated marginally by 0.4% in May, while the FTSE Bursa Malaysia KLCI declined by 1.9%, in line with regional equities (between -0.2% and -3.7%) due to investors’ risk aversion amid the lockdowns in China.
Meanwhile, it also stated that the overall gross and net impaired loan ratios remained broadly stable at 1.6% and 1% respectively.
This reflected the marginal increase in impairments from the business and household segments, following the tapering of repayment assistance measures since the first quarter of the year.
Total provisions remained at a prudent level accounting for 1.8% of total banking system loans and 109.1% of impaired loans.
As of end-May 2022, total provisions and regulatory reserves stood at RM40.7 billion (end-April: RM 40.2 billion).
According to BNM, the banking system recorded RM121.5 billion in excess capital buffers.
Headline inflation increased to 2.8% for the month (April: 2.3%) reflecting the continued uptrend in core inflation in line with an improvement in economic activity amid lingering cost pressures.
“As expected, core inflation was higher at 2.4% (April: 2.1%), mainly due to higher inflation for both food away and food at home, rental, and repair and maintenance for personal transport,” the central bank said.
According to BNM, this uptick occurred amid costlier imported food inputs, mainly due to war in Ukraine and inclement weather conditions, an increase in demand during the festive season and the reopening of Malaysia’s international borders.
Meanwhile, Manufacturing Industrial Production Index continued to expand above the long-term average in April 2022 at 6.2% (2011-2019 averaged: 4.8%).
Growth was driven mainly by the electrical and electronics cluster which recorded double-digit growth for the eighth consecutive month since September 2021 amid strong demand globally. — TMR/graphics by TMR