Bank Negara: Net financing up 6% m-o-m

Rise in outstanding loans and corporate bonds

“The growth in outstanding loans was bigger in businesses, rising to 6.7% in August compared with 5.9% in July.” Bank Negara

PETALING JAYA: Bank Negara says net financing grew by 6.1% month-on-month (m-o-m) in August from July’s 5.3% on the back of a rise in outstanding loans and corporate bonds.

Loans by the banking system increased by 6.8% in the month with loans to households rising by 6.5% as opposed to 6.1% growth in July despite the higher interest rate environment.

Consumption showed no sign of weakening as reflected in the higher loan applications for houses and cars.

“The growth in outstanding loans was bigger in businesses, rising to 6.7% in August compared with 5.9% in July.

“Wholesale trade, manufacturing and utilities sectors were the main contributors for the increase,” Bank Negara said in a statement yesterday.

Small and medium enterprises sustained higher credit flows with outstanding loan growth to the segment rising by 7.5% in August as compared to 6.6% in July.

Despite headwinds such as higher interest rates in developed economies like the United States and inflationary pressures, adjustments in the domestic financial market remained steady in August supported by low foreign exchange volatility and sufficient trading volume, the central bank said.

Malaysia 10-year bond yield rose by 10 basis points (bps) alongside a higher 10-year US Treasury bond yield of 45.4 bps the central bank raised its overnight policy rate (OPR) by 25 basis points in July to 2.25%.

However, the hawkish stance of the Federal Reserve, led the US dollar to rise against the ringgit by 0.8% in August while the FBM KLCI rose by 1.3% due to net inflows of foreign funds and better gross domestic product in the second quarter.

While global economic prospects remained under threat of higher rates and inflationary pressures, Bank Negara said the local banks remained well-capitalised and resilient against economic stresses and could support credit flows to the economy.

This is underpinned by sound asset quality seeing stable gross and net impaired loans ratios at 1.84% and 1.1% respectively.

The banking system reported Rm126.7bil in excess capital buffers and Rm41.5bil of aggregate provisions and regulatory reserves.

Higher cost pressures however saw headline inflation for August hit 4.7% year-on-year (y-o-y) while core inflation rate hit a new high of 3.8% y-o-y.

MIDF Research recently pointed out that the rise in inflation rates could potentially spark another 25 basis points hike in the OPR by Bank Negara in November.

External demand for Malaysian products remained firm with exports charting a growth of 48.2% in August compared with 38% growth in July. Manufactured export growth was driven by electrical and electronics and petroleum products.

Export of commodities was driven by crude palm oil, liquefied natural gas and crude petroleum shipments, the central bank said.

Bank Negara said the country’s diversified exports would offset an expected slowdown in export growth due to lower commodity prices and moderation in global growth projected.

The strong July and August economic and financial data has led some economists to forecast third quarter gross domestic product growth to remain high at above 8% after the 8.9% growth posted in the second quarter.