KUALA LUMPUR: November broad money (M3) growth edged up to 7.4 per cent year-on-year, the highest since April 2015 as compared to October, which stood at 7.1 per cent.
Kenanga Investment Bank Bhd Reseach said this was underpinned by larger growth of net claims on government (37.6 per cent), claims on private sector (7.1 per cent) and net other influences (4.5 per cent).
Collectively, these results have more than outweighed faster contraction of net foreign assets, about -2.7 per cent, reflecting rampant capital outflows.
The research firm said in terms of percentage point (ppt) contribution to growth, claims on the private sector remained the key contributor, at 7.0 ppt, followed by net claims on government at 2.9 ppt, while net other influences down -1.7 ppt and net external reserves down -0.8 ppt), all remained a drag to M3 growth.
On a month-on-month basis, M3 growth eased to 0.6 per cent.
Kenanga said tracking a similar direction, narrow money (M1) growth increased to 3.3 per cent year-on-year for November as compared to 3.1 per cent in October, reversing its downward trend since the beginning of the year, as softer growth of currency in circulation (2.3 per cent) was offset by expansion in demand deposits (3.6 per cent).
“This was in line with expectation of stronger domestic spending, particularly driven by festive purchases, despite faltering capital market performance during the month,” it said.
On a month-on-month basis, M1 growth expanded by 0.6 per cent as compared to 0.3 per cent in October.
Kenanga said loan growth retained an uptrend in November, marking a 31-month high of 6.2 per cent year-on-year (October: 6.0 per cent), mainly driven by higher loans extended for the purchase of fixed assets excluding land and building (9.8 per cent) and working capital (6.3 per cent).
This was also supported by a more modest contraction in loans for construction (-13.6 per cent), which altogether have offset moderation in loans for the purchase of residential property (7.7 per cent).
On a month-on-month basis, loan growth rose marginally to 0.4 per cent (October: 0.3 per cent), amid unchanged weighted average lending rate among commercial banks of 4.98 per cent.
Deposit growth rose to a 41-month high of 6.5 per cent year-on-year as compared to October which stood at 5.9 per cent, propelled by increase in repurchase agreements (46.3 per cent) and foreign currency deposits (6.0 per cent) and to a lesser extent a smaller contraction in negotiable instrument of deposits (-16.4 per cent).
Meanwhile, Kenanga said banks’ liquidity remained healthy despite slight easing in the liquidity coverage ratio to 141.4 per cent as compared to 147.0 per cent in October, due to lower stock of high quality liquid assets and higher net cash outflow recorded in the banking system.
“Overall, loan growth has moderated to 5.1 per cent year to date, well within our whole year estimate of 5.0 per cent, while deposit growth expanded by 5.4 per cent,” it said.
Kenanga said loan growth is forecasted to ease further to 4.2 per cent in 2019, given the subdued inflationary trend and prospects of moderating global growth.
“In ensuring capital market stability, ample liquidity and to remain supportive of growth, we believe Bank Negara Malaysia (BNM) will hold the OPR (overnight policy rate) steady at 3.25 per cent this year,” it said.