Broad money supply and loan growth rose sharply in December due to a surge in demand deposits and a rebound in other deposits, combined, the two contributed 2.3 ppts to overall M3 growth. However, according to Kenanga the momentum was partially weighed by a moderation in fixed deposits and a sustained contraction in savings deposits.
M3 growth was boosted by strong expansion in net claims on government, followed by foreign assets and private sector. Net claims on government: expanded due to higher claims on government. Its contribution to overall M3 growth edged up to 2.0 ppts. Foreign assets rose to a five-month high due to a surge in net foreign assets in the banking system. Its contribution to overall M3 growth expanded to 2.2 ppts, a five-month high. Claims on the private sector expanded due to higher loans and securities. Its contribution to overall M3 expanded to 5.4 ppts.
Loan growth surged to a 12-month high, the higher growth was newly attributed to the expansion in the working capital,
which reached a nine-month high and contributed 1.0 ppts to overall loan growth. This was followed by an expansion in loans for construction, contributing 0.1 ppts to the overall loan growth. Overall, loan growth remained supported by sustained growth in residential property and transport vehicles, which combined contributed 3.6 ppts to overall loan growth.
By sector: Attributable to expansion in finance & insurance and other sectors, as well as a rebound in mining & quarrying, contributing a combined 0.9 ppts to overall loan growth. In addition, household sector growth remained unchanged for the
third straight month, with its contribution to overall loan growth edge down slightly to 3.4 ppts. MoM: Growth expanded to the highest since April 2018.
Deposit growth increased to a six-month high supported by higher growth in demand deposits, which contributed 1.2 ppts to
the overall deposit growth. This was also contributed by higher foreign currency deposits and the rebound in other deposits accepted, contributed 2.0 ppts to deposit growth. MoM: growth rose to a 10-month high.
The house maintain the 2024 loan growth forecast at 4.5% – 5.0%. Kenanga makes no change to its 2024 loan growth forecast for now despite better-than-expected loan growth in 2023, which beat forecast range of 4.5% – 5.0%. This is largely because the house expects subsidy rationalisation to affect demand conditions, especially in the 2H24.
However, Kenanga retains the 2024 GDP growth forecast at 4.9% from an estimated 3.5% to 4.0% in 2023 as the house believes growth will benefit from the technology upcycle and China’s gradual economic recovery. Additionally, it also expects BNM to maintain its overnight policy rate (OPR) at 3.00% throughout 2024 on the back of a stable inflation outlook while supporting its growth trajectory
