In its monthly highlights-July 2024 report, the central bank said the currencies of Singapore, Thailand, Philippines, Indonesia, and South Korea increased by an average of 1% in July 2024.
It added that the 10-year Malaysian Government Securities (MGS) yield decreased by 14 basis points (bps) compared to the regional average of 25 bps, alongside a decline in US bond yields.
The FTSE Bursa Malaysia KLCI (FBM KLCI) traded higher by 2.2% versus the regional average of 2%.
“Domestic financial markets were mostly driven by global developments, particularly shifting expectations over the US monetary policy path,” it said.
The US Federal Reserve (Fed) officials expressed confidence that recent readings indicated progress towards their target inflation, suggesting a potential policy rate reduction may come as early as September 2024.
Consequently, financial market participants revised their 2024 US policy rate expectations to two to three cuts (June 2024: one to two cuts).
On credit growth to the private non-financial sector, BNM said this will be sustained at 5.5% as at end-July 2024 (June 2024: 5.5%), following higher outstanding loan growth of 6.2% (June 2024: 6%) while outstanding corporate bonds grew more moderately at 3% (June 2024: 3.4%).
For businesses, outstanding loan growth rose to 6% (June 2024: 5.7%), driven mainly by higher growth in working capital loans, particularly across the manufacturing and services sectors.
“Investment-related loan growth remained forthcoming,” it said.
Meanwhile, household loan growth was sustained at 6.2% amid steady loan expansion for housing and car purchases.
BNM said loan applications were higher, reflecting household demand for financing.
On banks’ liquidity and funding positions, the central bank said it remained supportive of intermediation activities as the banking system continued to record healthy liquidity buffers with an aggregate liquidity coverage ratio of 150.8% (June 2024: 155.1%).
The aggregate loan-to-fund ratio remained broadly stable at 83% (June 2024: 82.8%).
“The resilience of the banking system continued to be underpinned by sound asset quality, which saw overall gross and net impaired loans ratios stable at 1.6% and 1%, respectively,” it said.
The loan loss coverage ratio, including regulatory reserves, continued to be at a prudent level of 124.5% impaired loans (June 2024: 124.1%), with total provisions accounting for 1.4% of total loans.