Net financing growth continues to support economic activity, says Bank Negara

A general view of the headquarters of Bank Negara Malaysia. — Picture by Yusof Mat Isa
A general view of the headquarters of Bank Negara Malaysia. — Picture by Yusof Mat Isa

KUALA LUMPUR, Aug 30 — Malaysia’s net financing growth continued to support economic activities, increasing to 7.2 per cent in July from 6.9 per cent in June, says Bank Negara Malaysia (BNM).

In its “Monthly Highlights-July 2018” report released today, BNM attributed the growth to the increase in both outstanding corporate bonds, which rose to 13 per cent in July from 12.4 per cent in June, and outstanding banking system loans, which improved to 5.3 per cent in July versus five per cent in June.

“The outstanding loans growth for businesses and households in July increased 3.7 per cent and six per cent, respectively.

“The growth of household loan applications and approvals for the purchase of passenger cars also increased to 24.8 per cent and 39.1 per cent, respectively, mainly due to the tax holiday period,” it said.

Meanwhile, BNM said domestic financial markets continued to be supported by domestic institutional investors (DIIs) in July.

“The bond market experienced a resumption of non-resident inflows during the month, along with sustained demand from DIIs. This led to an eight basis points decline in the five-year Malaysian Government Securities yield.

“Meanwhile, the benchmark FTSE Bursa Malaysia KLCI increased by 5.5 per cent despite continued non-resident outflows, with construction stocks registering a strong recovery, supported by DII buying interest amid some clarity on the status of infrastructure projects,” it said.

However, BNM said the ringgit depreciated 0.5 per cent in July amid non-resident portfolio outflows, mainly due to lingering concerns over the escalating global trade tensions and expectations of a faster pace of United States monetary policy normalisation.

The central bank also said the banks maintained sufficient liquidity to support intermediation and meet exigent needs.

“Banking system liquidity coverage ratio (LCR) stood at 141.6 per cent, with all banks recording LCR levels above 100 per cent, despite full implementation only coming into effect on Jan 1, 2019,” it said.

The Basel III LCR has been phased in since June 2015, with initial compliance set at 60 per cent and progressive increments of 10 per cent each year until it reaches 100 per cent effective next year.

The minimum requirement is set at 90 per cent as of Jan 1, 2018.

On banks’ funding structure, the central bank said the funding profile of the banks was stable, with loan-to-fund ratio and loan-to-fund-and-equity ratio at 83.4 per cent and 72.7 per cent, respectively. — Bernama

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