The document provides a monthly economic update for Bank Muamalat Malaysia Berhad. It discusses several key economic indicators:
1) Loans growth accelerated to a 19-month high in September driven by stronger business and household loans. However, loan approvals moderated.
2) Industrial production slowed in August across various sectors. Exports were steady but margins in August. Inflation eased slightly in September.
3) Reserves were higher in October, while the leading index eased in August. Banking system asset quality reached a new record low in September.
Connector Corner: Accelerate revenue generation using UiPath API-centric busi...
Msia Economics Monthly - 0711
1. ECONOMICS
November 2007
Bank Muamalat Malaysia Berhad
MONTHLY ECONOMIC UPDATE
Banking System
Loans growth accelerated to 19-month high in September 2007
Industrial Production
Production slowed amidst moderations across the board in August 2007
External Trade
Exports steadier albeit marginally in August 2007
Consumer Prices
Inflation eased slightly in September 2007
External Reserves
Reserves higher as at 1H October 2007
Leading Indicators
Leading Index eased in August 2007
Primary Indicators
Bank & Industry
Economics Illustrated
Recent Trends in Residential Property Stocks and Sales
FOR INTERNAL CIRCULATION ONLY
[07/10/21]
Refer to important disclosures at the end of this report.
Bank Muamalat Malaysia Berhad
2. ECONOMICS
November 2007
BANKING SYSTEM
Loans growth accelerated to Outstanding loans for the total banking system grew by 9.5% y-o-y in September
19-month high in September 2007, its sharpest rise in 19 months, buoyed by expansions in both the business
and household loans. Business loans growth accelerated to 14.8% from a year ago,
after growing by 12.8% in August, while household loans grew by 7.3% following a
growth of 7.2% the previous month.
Higher loans growth were recorded by most business segments, most notable was
seen in the transport and communications sector, which registered its third
consecutive triple-digit gain, growing by 182.2% y-o-y in the month under review.
Manufacturing sector loans, which accounts for nearly 25% of total business loans,
however, saw a slight easing, down to 9.0% from 9.2% in August. Meanwhile,
outstanding credit for SMEs on the whole, accelerated to 7.0% in September, from
a growth of 5.9% the previous month.
Mixed results were achieved by the main household loans groups, as mortgage
loans accelerated to 7.5% y-o-y from 7.3% in August while passenger car loans
growth narrowed to 2.8% from 3.1% previously. Consumption credit, however, rose
16.6% after slipping to 16.5% the previous month.
(% Y-o-Y)
(% Y-o-Y)
(% Y-o-Y)
16.0 12.0
9.5
14.0
11.0
8.5 12.0 Household loans (rhs)
10.0
10.0
Banking system
Business loans
7.5
outstanding loans 8.0 9.0
(lhs)
6.0
6.5
8.0
4.0
2.0 7.0
5.5
Oct-06
Nov-06
Dec-06
Jan-07
Feb-07
Mar-07
May-07
Jun-07
Jul-07
Oct-06
Nov-06
Dec-06
Jan-07
Feb-07
Mar-07
May-07
Jun-07
Jul-07
Sep-06
Sep-07
Sep-06
Sep-07
Apr-07
Aug-07
Apr-07
Aug-07
Islamic financing made Islamic financing growth outpaced total loans growth in September 2007, rising by
stronger gains 10.2% from a year ago, after bottoming at 9.1% in July. Still, it remains below the
13.8% growth rate realised a year ago.
Most financing sectors experienced stronger growth rates. Household credit,
which accounted for 62.7% of total financing, grew by 8.2% y-o-y in September,
stronger than the previous month’s growth of 7.8%. Financing for passenger cars,
grew marginally stronger to 6.5%, compared to 6.4% in August. There was
however, a slight pull back in outstanding financing for residential property, which
grew by 4.8% in September from 4.9% in August.
Share of businesses financing had also been making steady gains over the past
eighteen months. The second largest portion of total Islamic financing after
automobile financing (in terms of purpose), was taken up by working capital, which
grew by 41.6% in September from a growth of 38.9% in August.
Islamic financing share of total banking system loans, however, stagnated to 13.1%
for a second month, after falling to an eleven month low of 13.0% in July. Total
outstanding Islamic financing was RM84.8 billion at end-September 2007.
(% Y-o-Y)
14.0 (% )
13.3
13.0
Islamic banking 13.2
12.0
outstanding financing
Islamic financing share
11.0
of total loans
13.1
10.0
13.0
9.0
Oct-06
Nov-06
Dec-06
Jan-07
Feb-07
Mar-07
May-07
Jun-07
Jul-07
Sep-06
Sep-07
Apr-07
Aug-07
Oct-06
Nov-06
Dec-06
Jan-07
Feb-07
Mar-07
May-07
Jun-07
Jul-07
Sep-06
Sep-07
Apr-07
Aug-07
2
Bank Muamalat Malaysia Berhad
3. ECONOMICS
November 2007
Table 1: Financing
Growth rate (% y-o-y) Sept '06 July '07 Aug '07 Sept '07
Banking system (excl Islamic banking) 6.6 8.0 8.5 9.4
Islamic banking 13.8 9.1 9.5 10.2
Muamalat 33.4 23.7 26.1 23.2
Muamalat share (%) Sept '06 July '07 Aug '07 Sept '07
- of total banking system 0.9 1.0 1.0 1.0
- of Islamic banking 6.8 7.1 7.2 7.2
Credit applications surged again Credit applications continued to surge, rising by 58.3% y-o-y in September, up from
the previous month’s gain of 52.5%. The robust trend was fuelled by soaring credit
applications from the business sector, which had accelerated to 70.9%, compared to
an increase of 51.7% last month. SME applications however, eased to 34.1% from a
growth of 47.8% in August. Household applications slipped to 43.7% after growing by
53.7% previously.
(% Y-o-Y)
(% Y-o-Y)
120.0
80.0
90.0
Banking system
60.0
Business applications
loan applications
60.0
40.0
30.0
20.0
Household applications
0.0
0.0
(30.0)
(20.0)
Oct-06
Nov-06
Dec-06
Jan-07
Feb-07
Mar-07
May-07
Jun-07
Jul-07
Oct-06
Nov-06
Dec-06
Jan-07
Feb-07
Mar-07
May-07
Jun-07
Jul-07
Sep-06
Sep-07
Sep-06
Sep-07
Apr-07
Aug-07
Apr-07
Aug-07
Business and household In contrast, loan approvals in September moderated, slowing to 45.2% y-o-y from
approvals ease further 54.5% the previous month as both business and household sectors experienced
moderations in credit approvals.
Businesses approvals eased to 61.4% y-o-y from 71.8% in August, although there
was higher approvals growth for SMEs which was up by 54.0%, compared to 30.0%
previously. Household approvals was also slower, easing to 28.6%, after growing by
39.1% in August. Among the segments which experienced contractions in loan
approvals were those for the purchase of residential property and consumption
credit, which eased to 17.6% and 10.1% respectively, from 19.6% and 10.3% the
previous month. Loans for purchase of securities slowed further to 50.2% after
expanding by 151.8% in August and peaking at 735.2% in July.
(% Y-o-Y) (% Y-o-Y) (% Y-o-Y)
100.0 175.0 60.0
150.0
80.0
40.0
Business approvals
125.0
(lhs)
Banking system
60.0
100.0 20.0
loan approvals
40.0 75.0
Household 0.0
50.0
20.0
approvals (rhs)
25.0
(20.0)
0.0
0.0
(25.0) (40.0)
(20.0)
Oct-06
Nov-06
Dec-06
Jan-07
Feb-07
Mar-07
May-07
Jun-07
Jul-07
O c t-06
J an-07
J un-07
N ov -06
D ec -06
F eb-07
Mar-07
M ay -07
J ul-07
Sep-06
Sep-07
Sep-06
Sep-07
Apr-07
Aug-07
Apr-07
Aug-07
Disbursements climbed back up Loan disbursements growth regained its momentum in September, rebounding
18.0% y-o-y after easing to 15.2% in August, mainly due to higher allocation to the
business sector. Disbursements to businesses was up by 19.9% from a previous
increase of 11.4%, as SMEs received 9.3% more from a year ago, stronger than last
month’s growth of 5.3%. Meanwhile, disbursements to households moderated further
to 13.7%, after gaining 24.6% in August.
3
Bank Muamalat Malaysia Berhad
4. ECONOMICS
November 2007
Asset quality improved to Asset quality strengthened to a fresh new low. Net non-performing loans (NPL) for
new record low yet again the entire banking system gauged on a three-month basis improved to 3.5% of net
total loans in September from 3.6% in August.
Table 2: NPF Ratios
Gross NPF Ratio (%) Sept '06 July '07 Aug '07 Sept '07
Banking system (3 mth) 8.9 7.4 7.2 6.9
Banking system (6 mth) 7.6 6.4 6.2 6.0
Muamalat* 7.2 9.2 9.2 9.1
Net NPF Ratio (%) Sept '06 July '07 Aug '07 Sept '07
Banking system (3 mth) 5.1 3.8 3.6 3.5
Banking system (6 mth) 4.0 3.0 2.9 2.8
Muamalat* 4.3 6.1 6.0 5.7
•Note: 3 month basis effective 2007
Core deposits growth slowed Banking system core deposits moderated for the second straight month, easing to
for second month 13.0% y-o-y, from 14.0% in the month under review. This was due to lower
placements in fixed and savings deposits which only grew by 11.0% and 11.9% this
month, compared to 12.8% and 12.2% in August. Demand deposits growth,
meanwhile, grew a stronger 21.0% from 19.6% previously.
Islamic banking core deposits similarly softened, increasing 34.1% y-o-y compared
to a growth of 38.8% in August on reduced placements in investment and demand
deposits. Investment deposits, which account for nearly 65% of total core deposits,
grew a slower 44.8% compared to 49.3% in August, while demand deposits
increased by only 15.4% in September, compared to 22.6% previously. Further
core deposits slowdown was however mitigated by a rise in savings deposits which
grew a stronger 22.1%, compared to 20.5% previously. Nonetheless, despite the
moderation, total Islamic core deposits maintained its record high share of banking
system core deposits at 17.8% for the second straight month.
(%)
(% Y-o-Y) (% Y-o-Y)
17.0 18.0
39.0
15.0
Islamic banking
34.0 17.0
core deposits
13.0
Banking system (lhs)
29.0
11.0
core deposits 16.0
Islamic banking share
9.0
24.0
of total core deposits
7.0
15.0
(rhs)
19.0
5.0
14.0 14.0
3.0
Oct-06
Nov-06
Dec-06
Jan-07
Feb-07
Mar-07
May-07
Jun-07
Jul-07
Oct-06
Nov-06
Dec-06
Jan-07
Feb-07
Mar-07
May-07
Jun-07
Jul-07
Sep-06
Sep-07
Sep-06
Sep-07
Apr-07
Aug-07
Apr-07
Aug-07
Table 3: Core Deposits
Growth rate (% y-o-y) Sept '06 July '07 Aug '07 Sept '07
Banking system (excl Islamic banking) 1.9 12.5 9.8 9.3
Islamic banking 15.8 37.6 38.8 34.1
Muamalat 69.2 28.9 12.4 1.7
Muamalat share (%) Sept '06 July '07 Aug '07 Sept '07
- of total banking system 1.7 1.6 1.6 1.5
- of Islamic banking 11.4 9.4 8.8 8.6
September statistics scheduled to be released 28 October 2007
4
Bank Muamalat Malaysia Berhad
5. ECONOMICS
November 2007
INDUSTRIAL PRODUCTION
Production slowed in August The Index for Industrial Production (IIP) slowed to 0.9% y-o-y in August 2007 from
amidst moderations across 2.1% in July. The slowdown was due to moderations that emerged across the board.
the board Primary IIP component, the manufacturing sector growth deteriorated to 0.8%,
following gains of 1.7% in July, while the mining and electricity sectors eased to 0.2%
and 2.6% from gains of 3.3% and 3.8%, respectively in July.
(% Y-o-Y) (% Y-o-Y)
11.0 17.0
Manufacturing Index
9.0
12.0
Electricity Index
7.0
7.0
5.0
IPI
3.0 2.0
1.0
Mining Index
(3.0)
(1.0)
(3.0) (8.0)
Oct-06
Nov-06
Dec-06
Jan-07
Feb-07
ar-07
ay-07
Jun-07
Jul-07
Sep-06
Oct-06
Nov-06
Dec-06
Jan-07
Feb-07
Mar-07
May-07
Jun-07
Jul-07
Aug-06
Apr-07
Aug-07
Sep-06
Aug-06
Apr-07
Aug-07
M
M
Manufacturing production was dragged lower by subdued performance in both the
domestic-oriented as well as the export-oriented industries. The slower momentum
was despite a steadier production of semiconductors, the largest of E&E components,
which accelerated to 7.0% y-o-y in August following July’s increase of 4.6%,
appearing in line with the recent up-tick in the global semiconductor cycle. Other E&E
components, however, remained sluggish, such as those producing television and
radio transmitters and apparatus, which declined further by 21.8%, after contracting
by 7.1% in July. Production in television and radio receivers was also down a further
9.2%, following a contraction of 5.8% in July. Other industries that contributed to the
manufacturing slowdown includes refined petroleum products, which grew a mere
0.3% y-o-y due to lower sales, after gaining 3.4% in July and chemical products,
which fell by 8.7% after eight months of positive growth.
(% Y-o-Y) (% Y-o-Y)
25.0
15.0
E&E Index Refined Petroleum
20.0
Products Index
10.0
15.0
10.0
5.0 Manufacturing
5.0
Index
0.0 0.0
Chemical Products
(5.0)
Index
(5.0)
(10.0)
N o v-0 6
Ja n -0 7
M a r-0 7
M a y-0 7
Ju n -0 7
Ju l-0 7
Au g -0 6
Se p -0 6
O ct-0 6
D e c-0 6
F e b -0 7
Ap r-0 7
Au g -0 7
Oct-06
Nov-06
Dec-06
Jan-07
Feb-07
Mar-07
May-07
Jun-07
Jul-07
Sep-06
Aug-06
Apr-07
Aug-07
On a monthly basis, the IIP fell 0.2% in August, after gaining 1.7% in July. The decline
was a result of contractions in both the mining and electricity sectors by 2.8% and
1.0%, respectively, as well as a slowdown in the manufacturing sector, which eased
to 0.6% from a 1% growth in July.
The manufacturing slowdown was mainly due to a decline in the E&E sector which
slipped back into the red by 1.9% m-o-m after recovering strongly the previous month,
soaring 12.1% following three consecutive months of declines. Semiconductor
production had eased to 4.3% from last month’s growth of 10.7%. Output of office and
accounting machines also declined further by 3.7% after contracting by 0.6% in July.
Refined petroleum products also retreated a further 1.8% compared to July’s decline
of 1.1%, while chemical products decline accelerated to 7.4% from 3.3% previously.
YTD, the IIP has increased by a meager 1.2% y-o-y, far below the 5.4% growth rate
realised during the same period last year. This was mainly due to the slowdown in the
manufacturing sector which had only risen 0.7% in the first eight months of the year,
as opposed to a growth rate of 8.6% in 2006. Electricity output had also moderated to
3.9% during the same time, while it had grown by 4.6% in 2006. Mining output
however, was stronger, up by 2.4% in 2007 compared to a contraction of 4.9% 2006.
5
Bank Muamalat Malaysia Berhad
6. ECONOMICS
November 2007
Weak manufacturing production in both July and August point to sustained
sluggishness for the third quarter of the year. With the manufacturing sector
accounting for as much as a third of total GDP, a more subdued GDP performance
for 2007 compared to 2006 is becoming more likely as the year draws to a close.
(% Y-o-Y) (% Y-o-Y) (% Y-o-Y)
12.0 6.5 16.0
GDP (rhs)
14.0
10.0 6.0
Aggregate
12.0
8.0 5.5
Demand
10.0
6.0 5.0
Manufacturing 8.0
Index (lhs)
4.0 4.5
6.0
Gross Fixed
2.0 4.0 Capital Formation
4.0
0.0 3.5 2.0
Q3 04
Q4 04
Q1 05
Q2 05
Q3 05
Q4 05
Q1 06
Q2 06
Q3 06
Q4 06
Q1 07
Q2 07
Q304
Q404
Q105
Q205
Q305
Q405
Q106
Q206
Q306
Q406
Q107
Q207
On the external front, global conditions have also not fared much better as the OECD
composite leading indicator’s (CLI) annualised six-month rate of change had pulled
back in both July and August. More recently, US manufacturing activities had also
seen an easing in September, with the US Institute of Supply Management’s (ISM)
Purchasing Manager’s Index (PMI) at 52.0%, slightly below the August reading of
52.9%. Other downside risks to global economic growth have yet to subside as the
US subprime mortgage woes persist and oil prices continue to hover at record levels.
As such, we maintain our forecast of a GDP growth of 5.8% for 2007, slightly slower
than last year’s performance of 5.9%, despite the Government’s expectations of
stronger growth at 6.0%. We do however, expect conditions to improve slightly in
2008, as domestic conditions may continue to insulate Malaysia from worsening
global conditions. The recent launching of several economic corridors is expected to
stimulate domestic demand and aid a number of industries particularly, the
construction industry, including those involved in the manufacturing of construction-
related products. This should in turn cushion business and consumer sentiments
come 2008. On the whole, we expect GDP to improve to 6.0% in 2008, stronger than
the 5.8% estimated for 2007.
September statistics scheduled to be released 7 November 2007
6
Bank Muamalat Malaysia Berhad