- Bank Negara released its latest financial development for October, as expected BNM said headline inflation moderated to 4.0% in October (September: 4.5%), following the dissipation of the base effect in electricity inflation. Core inflation increased slightly to 4.1% as the increase was predominantly contributed by food-related services and goods. On a month-on-month basis, the increase in core CPI moderated further to 0.1% in October (September: 0.3%).
Exports, however, registered a growth of 15% (September: 30.1%). Manufactured export growth was driven by E&E and petroleum products. Commodities exports continued to be attributed mainly to LNG and crude petroleum shipments.
Moving forward, BNM says the moderation in global growth and lower commodity prices are expected to weigh on Malaysia’s export growth. Nevertheless, Malaysia’s diversified exports across products and markets should help cushion this impact.
Net financing grew by 5.7% as at end-October (September: 5.6%), reflecting slightly higher growth in both outstanding loans (6.5%; September: 6.4%) and corporate bonds (3.6%; September: 3.5%).
Household loan growth moderated to 6.3% (September: 6.6%) as loan repayments growth outpaced that of disbursements across major loan purposes. The slower growth in disbursements reflected moderation in loan demand, particularly for the purchase of big-ticket items such as houses and cars.
For businesses, growth in outstanding loans increased to 5.5% (September: 5.2%), with higher loan growth recorded across most purposes. By segment, growth in loan disbursements remained forthcoming, particularly for SMEs.
Domestic financial market adjustments remained orderly
- BNM notes the global financial conditions continued to tighten. Many central banks had raised their policy rates and signalled further rate hikes to dampen high and persistent inflation. Against this backdrop, the global growth outlook has weakened, with the IMF lowering its 2023 global growth forecast to 2.7% from 2.9%. As these factors continued to support the US dollar strength, the ringgit depreciated by 1.9% against the US dollar during the month (regional average: -0.04%).
- Notwithstanding these global developments, domestic financial market adjustments remained orderly and financial conditions had somewhat eased. The 10-year MGS yields declined by 4.0 bps (regional average: +13.3 bps) and the FBM KLCI gained 4.7% (regional average: +2.9%), supported by the strong growth momentum of the domestic economy.
Banks remain well-capitalised to support economic recovery
- The Central Bank says local banks’ capital position remained strong to withstand potential stress and continue supporting credit flows to the economy with excess capital buffers of RM123.1 billion. Capital ratios rose marginally in October, driven by increases in retained earnings and new issuances of capital instruments.
Overall gross and net impaired loan ratios remain unchanged at 1.8% and 1.1%, respectively. The loan loss coverage ratio (including regulatory reserves) remains at a prudent level of 114.2% of impaired loans, with total provisions accounting for 1.8% of total loans.
As of end-October 2022, the banking system recorded RM 41.9 billion of total provisions and regulatory reserves.
