MALAYSIA’S monetary indicators demonstrated stronger momentum in September, supported by firmer money supply growth and a rebound in loan approvals, according to Hong Leong Investment Bank (HLIB) Research.
Narrow money supply (M1) expanded 7.7% year-on-year (YoY), up from 6.6% in August, while broad money (M3) edged higher to 4.4% YoY. Reserve money continued to contract but at a slower rate of –4.1% YoY, compared with –5.0% in the preceding month.
Loan activity showed mixed signals, with approvals rebounding 3.6% YoY even as applications eased to 0.1% YoY and disbursements fell 7.2% YoY. Deposit growth accelerated to 4.0% YoY, driven by stronger business and foreign deposits, while household deposits continued to expand steadily at 4.2% YoY.
Total loan growth improved marginally to 5.5% YoY, supported by a pickup in business loans, particularly in construction and investment-related activities. Gross corporate bond issuance surged to RM28.3 billion in September, led by utilities, finance, real estate, and construction sectors.
HLIB cautioned that the contraction in business loan applications signals cautious sentiment amid ongoing global policy uncertainties, though domestic demand is expected to remain resilient.
"Upside risks include a potential de-escalation of global trade tensions, favourable outcomes on semiconductor tariffs, and stronger global growth," it said, maintaining its 2025 GDP growth forecast at 4.5%.
RHB Research highlighted that Malaysia’s banking system data for September showed system loans expanding 5.5% YoY across both household and non-household segments, with stronger loan approvals and disbursements in the third quarter indicating growing confidence among banks.
Improved interest rate spreads suggest domestic net interest margin pressure remains manageable, while asset quality remains stable with gross impaired loans at 1.41%.
RHB Research maintained its "Overweight" call on the banking sector, with CIMB Group, Hong Leong Bank, and Public Bank among its top picks. - November 3, 2025
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