KUALA LUMPUR (June 30): Malaysia saw an improvement in loan growth across the board in May, with credit to the private non-financial sector expanding by 4.0% year-on-year as at end-May, from 3.7% in April 2023, driven mainly by higher growth in credit to businesses (2.8%; April: 2.5%).

Outstanding corporate bonds grew by 4.6% (from 4.4%), while outstanding business loans expanded by 1.6% (from 1.0%). The higher business loan growth reflected an improvement in loans for both working capital and investments to small and medium enterprises (SMEs) and non-SMEs, said Bank Negara Malaysia (BNM).

In the household segment, outstanding loan growth was sustained at 5.1% (from 5.0%), supported by higher growth across most loan purposes. Of note, household loan growth continued to be driven by loans for the purchase of houses (7.0%; April: 6.8%) and cars (8.4%; April: 8.0%).

In its Monthly Highlights report for May 2023, which was released on Friday (June 30), the central bank also said banks continued to record healthy liquidity buffers, with the aggregate liquidity coverage ratio at 151.2% (from 154.3%). The aggregate loan-to-fund ratio remained stable at 81.8% (from 82.1%).

Meanwhile, the overall gross impaired loan ratio remained broadly unchanged at 1.80% (from 1.78%), followed by the net impaired loan ratio at 1.1% (unchanged from 1.1%).

The loan loss coverage ratio, including regulatory reserves, remained at a prudent level of 114.1% of impaired loans, with total provisions accounting for 1.7% of total loans.

Headline inflation, meanwhile, has moderated to 2.8% (from 3.3%) — largely due to non-core consumer price index components, particularly lower inflation for fuel (-0.2 percentage point) and fresh food (-0.1 ppt). Core inflation dropped slightly to 3.5% (from 3.6%), amid lower inflation for communications services.

On the other hand, the nation's wholesale and retail trade growth moderated, with the index expanding by 4.7% in April — as opposed to March's 9.4% — due mainly to a decline in the motor vehicle segment.

The retail segment recorded a lower double-digit growth of 10.0% (from 13.8%), supported by sales at non-specialised and other specialised stores. Month-on-month, the index increased at a faster pace of 6.5% (from -0.9%).

Globally, investors maintained their risk-off approach throughout May, as concerns over the impact of the US debt ceiling crisis and a weaker-than-expected rebound in China’s economy weighed on financial markets.

The ringgit, however, did worse and depreciated against the greenback by 3.4%, compared with the average regional decline of 1.2%.

Similarly, the benchmark FBM KLCI index declined by 2.0% (regional average: -1.3%).

The 10-year Malaysian Government Securities yield decreased slightly by three basis points, supported by non-resident inflows into the domestic bond market.