HEADLINE inflation remained stable at 4% in November, similar to the previous month, as the increase in core inflation was offset by lower inflation in other categories, namely fuel and fresh food, Bank Negara Malaysia said.

The central bank said core inflation rose slightly to 4.2% during the month from 4.1% recorded in October, mainly due to the increase in prices for food away from home.

“The manufacturing Industrial Production Index expanded in October by 4.2%, with growth driven mainly by the electrical and electronic cluster, which recorded above-average growth at 8.7%,” it said in a statement today.

“The primary cluster, particularly refined petroleum products production, also supported the growth with the resumption of operations at an existing oil refinery that was previously under maintenance.”

It said net financing moderated as repayments outpaced disbursements, with net financing growing by 4.7% as of end-November (October: 5.7%), reflecting lower growth in both outstanding loans (November: 5.5%; October: 6.5%) and corporate bonds (November: 2.6%; October: 3.6%).

Household loan growth moderated to 6% (October: 6.3%) as loan repayments growth outpaced that of disbursements across major loan purposes.

Outstanding business loan growth moderated to 3.4% (October: 5.2%), mainly due to strong growth in repayments among large firms.

Loan disbursements continued to record double-digit growth (November: 13.7%; October: 13.4%), despite some moderation in growth in the consumer manufacturing and real estate sectors.

Bank Negara highlighted that domestic financial conditions had eased amid improved investor sentiment while global financial conditions had also moderated following expectations of a slower pace of monetary policy tightening as inflation continued to show signs of peaking, especially in the United States.

“Easing of Covid-19 restrictions in China also supported the overall investors’ risk sentiment,” it said.

“Consequently, domestic financial conditions eased, with the 10-year Malaysian government bonds yields declining by 26 basis points (regional average: -44.4 bps) and the FBM KLCI rising by 1.9% (regional average: +5.2%).”

It noted that Malaysia’s financial markets’ performance was also supported by improved political certainty following the formation of the new government.

As for the ringgit, the central bank said the local note appreciated by 6.3% against the US dollar, in line with a broad-based appreciation in major and regional currencies against the greenback.

“The banking system’s liquidity coverage ratio remained healthy and the banks are proactive in managing their buffers to address the year-end seasonal fluctuations in banking system liquidity and continue to be supportive of intermediation,” it said.

Bank Negara said the aggregate loan-to-fund ratio remained largely stable at 82.3% (October: 82%).

It asserted that asset quality in the banking system remained intact and the overall gross and net impaired loans ratios remained unchanged at 1.8% and 1.1% respectively.

“Loan loss coverage ratio (including regulatory reserves) continues to record a prudent level of 116.5% of impaired loans, with total provisions accounting for 1.8% of total loans,” it said. – Bernama, December 30, 2022.