Broad money to grow 5 pct in 2018 — RHB Research

KUALA LUMPUR: Malaysia’s broad money (M3), which saw a slower year-on-year (y-o-y) growth in August, is expected to rise by 5 per cent this year, RHB Research Institute Sdn Bhd said.

This would be higher than the 4.7 per cent growth recorded last year.

“However, the higher growth in money supply is unlikely to result in any demand-pull price pressure as core inflation remains subdued.

“We envisage inflation to moderate to 1.2 per cent in 2018, from 3.7 per cent in 2017 (2016: +2.1 per cent), while core inflation should remain manageable,” the research firm said in a note yesterday.

It said loan growth was also expected to remain supported at 5.2 per cent for the year (2017: +4.1 per cent) backed by resilient demand for credit.

Similarly, RHB Research also expected the overnight policy rate (OPR) to be kept unchanged at 3.25 per cent for the rest of 2018 and into 2019.

“This comes as Malaysia is facing a slower economic growth environment, while inflationary pressure is not likely to pose a threat going forward,” it said.

In August, M3 y-o-y growth moderated to 6.4 per cent compared with July’s 6.6 per cent, dragged lower by a drop in demand for funds from foreign operations.

Nevertheless, RHB Research noted that demand for funds from the domestic public and private sectors picked up pace.

Meanwhile, Maybank IB Research said the zero-rating of the Goods and Services Tax in June-August boosted consumer discretionary spending – as indicated by consumer credit indicators – but there were signs of pullback after the consumption tax holiday period.

In August, credit card spending by domestic cardholders increased further by 13.2 per cent y-o-y while household loan approvals for the purchase of passenger cars rose 33.7 per cent y-o-y.

However, it noted that household loan applications for passenger car purchases slowed sharply to +9.1 per cent y-o-y in August (July: +33.6 per cent y-o-y, June: +43.5 per cent).

Maybank IB Research said this supported its view that consumer spending was expected to ease after the consumption tax holiday months.

On narrow money (M1), RHB Research said its growth eased in August, in tandem with M3, to 4.4 per cent y-o-y, down from a 4.7 per cent growth in the previous month on the back of slowdown in growth of currency in circulation.

“In contrast, loan growth inched higher to 5.4 per cent y-o-y from +5.3 per cent in the previous month, driven by higher loans extended to both households and corporate sectors,” it said.

The research firm said growth of household sector loans edged higher to 6.1 per cent y-o-y in August (July: +5.8 per cent) on a rise in personal loans, credit cards and smaller contraction in car loans, but this was partly offset by slower growth of residential housing loans.

Similarly, corporate loans inched up to 4.4 per cent yo-y in August (July: +4.3 per cent), in tandem higher loans extended to the manufacturing, construction, wholesale and retail (including restaurants and hotels) and finance and insurance sectors.

This was partly offset by lower loans extended to the transport and mining sectors during the month. - Bernama