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3Q 2017 BNM Quarterly Bulletin
17 November 2017
Prestasi Ekonomi Suku Ketiga Tahun 2017
Gabenor
Bank Negara Malaysia
17 November 2017
Sidang Akhbar
3Q 2017 BNM Quarterly Bulletin
17 November 2017
Sidang akhbar akan meliputi:
Prestasi ekonomi pada suku ketiga tahun 2017
Perkembangan monetari dan kewangan
Inisiatif dasar Bank Negara Malaysia
2
3Q 2017 BNM Quarterly Bulletin
17 November 2017
Asia’s* Exports
Further expansion in global economic activity in the third quarter 2017
* Refers to Korea, Hong Kong SAR, C. Taipei, Singapore, Indonesia, Malaysia,
Thailand and Philippines
** Refers to latest available data
Source: National authorities, Bank Negara Malaysia estimates
Annual change, %
Source: National authorities, Bank Negara Malaysia estimates
Annual change, %
3.6
4.8
4.1
5.1
US Germany
Retail Sales
2Q17 3Q17
Growth in both the advanced and regional
economies continued to expand in 3Q 2017
Growth in the advanced economies was
supported by consumption and investment
Robust trade performance in Asia, driven by
continued external demand
Global Real GDP Growth
Domestic Demand in the Advanced Economies
2.52.3
1.5
6.9 6.8
6.2
5.14.6
3.6
0
2
4
6
8
Eu
ro a
rea
US
UK
Ph
ilip
pin
es
PR
Ch
ina
Ma
laysia
Indo
ne
sia
Sin
ga
po
re
Ko
rea
2Q17 3Q17
-10
0
10
20
1Q
-16
2Q
-16
3Q
-16
4Q
-16
1Q
-17
2Q
-17
3Q
-17**
Export Volume
Export Value
56 57
5958
US Euro area
Manufacturing PMI
2Q17 3Q17
Annual change, %Index (>50 = expansionary)
3
3Q 2017 BNM Quarterly Bulletin
17 November 2017
The Malaysian economy recorded a higher growth of 6.2% in
the third quarter of 2017
Source: Department of Statistics, Malaysia
• Robust private sector spending
• Public sector remained
supportive of growth
• Continued strength in exports
– Partly offset by faster expansion
in imports
4
5.8 6.2
-2
-1
0
1
2
3
4
5
6
7
8
1Q-16 2Q-16 3Q-16 4Q-16 1Q-17 2Q-17 3Q-17
Private consumption Private investment
Public consumption Public investment
Change in stocks Net exports
On the demand side, growth was anchored by
private sector spending
Annual change, % /
Ppt contribution to GDP
Private
domestic
demand
Public
sector
3Q 2017 BNM Quarterly Bulletin
17 November 2017
Continued expansion across all economic sectors
Note: 1Numbers do not add up due to rounding and exclusion of import duties
component
Source: Department of Statistics, Malaysia
• Services
Expansion across all sub-sectors
• Manufacturing
Stronger global and domestic demand
• Mining
Higher natural gas production in Sabah
and Sarawak
• Agriculture
Slower rubber and CPO production due
to adverse weather conditions
• Construction
Slower non-residential activity, particularly
in the commercial segment
5
5.86.2
-2
-1
0
1
2
3
4
5
6
7
1Q-16 2Q-16 3Q-16 4Q-16 1Q-17 2Q-17 3Q-17
Services ManufacturingAgriculture MiningConstruction
On the supply side, services and manufacturing
sectors remained the key drivers of growth
Annual change, % /
Ppt contribution to GDP1
3Q 2017 BNM Quarterly Bulletin
17 November 2017
Private consumption expanded by 7.2%, lifted mainly by better
labour market conditions…
7
Private consumption growth
improved…
Annual change, %
Real Private Consumption Growth
7.1 7.2
2
4
6
8
10
1Q
-15
3Q
-15
1Q
-16
3Q
-16
1Q
-17
3Q
-17
76
Source: Department of Statistics, Malaysia
6
7.3 7.3
3
4
5
6
7
8
1Q
-15
3Q
-15
1Q
-16
3Q
-16
1Q
-17
3Q
-17
… and sustained private
sector wage growth
Annual change, %
Private Sector Wage Growth*
14.4
14.5
1Q
-15
3Q
-15
1Q
-16
3Q
-16
1Q
-17
3Q
-17
Million Persons
Employment
…supported by improving
employment conditions…
*Private sector wages is derived from the salaries and wages data published in the Monthly Manufacturing Statistics and Quarterly Services Statistics by the
Department of Statistics, Malaysia. It covers 62% of total employment.
3Q 2017 BNM Quarterly Bulletin
17 November 2017
…although consumer sentiments have yet to recover to the
optimism threshold
Consumer sentiments remain below the
optimism threshold
Points
Multiple factors are weighing on sentiments…
MIER Consumer Sentiments Index
Source: Malaysian Institute of Economic Research, MIER
100.1
77.1
40
60
80
100
120
1Q
-14
2Q
-14
3Q
-14
4Q
-14
1Q
-15
2Q
-15
3Q
-15
4Q
-15
1Q
-16
2Q
-16
3Q
-16
4Q
-16
1Q
-17
2Q
-17
3Q
-17
Optimism threshold: 100 points
13 quarters
1 Sustained cost of living pressures
2Concerns over employment
opportunities
3 Debt obligations
… affecting vulnerable households the most
7
3Q 2017 BNM Quarterly Bulletin
17 November 2017
+ 311
+ 840
+ 1,783
+ 257
+ 475
+ 943
B40 M40 T20
Income Expenditure
While income growth has increased, wage levels remain low amid
higher expenditure
Larger increase in expenditure relative to
rise in income for B40 households
Source: Department of Statistics, Malaysia
Note:
1/ Elementary occupations workers perform single and routine tasks (e.g. package deliverers)
2/ Professionals include medical doctors, engineers, dentists, architects, musicians
Source: Department of Statistics, Malaysia
Difference between 2014 and 2016 (RM/ month) (RM/ Month)
Wage increases for low- to mid-skilled workers
are relatively low
HH Mean Income and Mean Expenditure Median Monthly Wages for Selected Occupations
0
1,000
2,000
3,000
4,000
5,000
6,000
Elementary 1/ Service& sales
Machineoperators &assemblers
Clericalsupport
Professionals 2/
2015 2016
Net
+RM 54/
month
Net
+RM 365/
month
Net
+RM 840/
month
High- skilledMid- skilledLow- skilled
+100 +25
+150
75%
of private consumption
+100
+85
10%
growth2.1% 6.1% 5.3% 3.5%
8
3Q 2017 BNM Quarterly Bulletin
17 November 2017
114.1
103.1
60
70
80
90
100
110
120
1Q
-15
3Q
-15
1Q
-16
3Q
-16
1Q
-17
3Q
-17
Private investment grew by 7.9%, supported by positive business
sentiments and higher capacity utilisation
Source: Department of Statistics, Malaysia, MIER
Annual change, %
MIER Business Conditions Index MIER Capacity Utilisation Rate
Points %
Private investment
continued to expandPositive business sentiments Higher capacity utilisation
Real Private Investment Growth
7.9
0
4
8
12
16
1Q
-15
3Q
-15
1Q
-16
3Q
-16
1Q
-17
3Q
-17
82.8
83.6
72
76
80
84
88
1Q
-15
3Q
-15
1Q
-16
3Q
-16
1Q
-17
3Q
-17
Average (‘11-’16): 79.2%
7.4
9
Optimism threshold:
100 points
3Q 2017 BNM Quarterly Bulletin
17 November 2017
Strong trade performance in 3Q 2017
External Trade
(Annual change, %)
% share
(2016)
2016 2017
Year 1Q 2Q 3Q
Gross Exports 100 1.2 21.4 20.5 22.1
Manufacturing 82 3.3 19.5 18.7 23.7
E&E 37 3.6 18.4 22.6 21.7
Non-E&E 45 3.0 20.3 15.8 25.4
Commodities 17 -8.1 27.7 28.2 12.5
Gross imports 100 1.9 27.7 19.0 19.8
Intermediate 57 -0.1 27.8 23.9 20.9
Capital 14 4.9 42.1 7.0 0.0
Consumption 10 7.3 4.0 1.5 14.9
Trade balance
(RM bil)- 88.1 18.9 24.1 26.7
Source: Department of Statistics, Malaysia
• Exports remained robust
– Broad-based expansion, particularly
manufactured exports
– Higher demand from key trading
partners
• Robust intermediate and consumption
imports
– Strong manufacturing activity
– Continued strength in domestic
consumption
• Trade balance widened to RM26.7 billion
10
3Q 2017 BNM Quarterly Bulletin
17 November 2017
Agri2%
Mining7%
Mfg41%
Finance21%
Info & comm8%
Distributive Trade
7%
Real Estate6%
Services49%
28.5
38.2
35.6
39.4
47.2
34.236.4
0
5
10
15
20
25
30
35
40
45
50
2012 2013 2014 2015 2016 1Q-3Q2016
1Q-3Q2017
Agriculture MiningManufacturing ConstructionFinancial Services Non-financial Services
Current trade strength owes much to the stable base of foreign direct
investment (FDI)
FDI inflows for 1Q-3Q 2017 set to match
previous year’s record high
Note: Figures may not add up due to netting off and rounding
Sources: Department of Statistics Malaysia, Bank Negara Malaysia
RM billion
FDI is broad-based across countries and sectors
Foreign Direct Investment in Malaysia
FDI Stock by Economic Sectors, 3Q 2017: RM559 billion
FDI Stock: Largest Contributors, 3Q 2017: RM559 billion
Singapore21%
Japan12%
HK8%
Netherlands7%
US7%
Switzerland5%
Germany4%
UK4%
Norway4%
PR China3%
Korea2%
UAE2%
Others21%
Export-
oriented
Domestic-
oriented
11
Construction
1%
Other Services,
7%
3Q 2017 BNM Quarterly Bulletin
17 November 2017
0
20
40
60
2005
2014
2005
2014
2005
2014
A holistic review of the investment incentives framework is timely for a
future-ready Malaysia
FDI was a game-changer
for Malaysia…
…but high foreign content
constrains net benefits to
domestic supply chain…
…while rapid shifts in global
environment necessitates
dynamic incentives
Investment incentives need to be nimble, relevant and tied to outcome-based indicators
Manufactured Exports & FDI
20.4
59.5
74.6
54.6
4.6
10.5
4.55.7
0
5
10
15
20
0
20
40
60
80
100
1980's 1990's 2000's 2010's-now
Mfg Exports (% of GDP, LHS)
Total FDI (% of GDP, RHS)
Foreign Content in Gross Exports
Tech disruption
Rapid
urbanisation
Innovation
Economic
complexity
Skilled jobs
Changing investor
preferences
Climate change
Global Trends in the Next Decade
Note: Regional average includes Malaysia, Indonesia, Philippines, Singapore, Thailand and Vietnam
Source: Department of Statistics, Malaysia, Bank Negara Malaysia, OECD
Regional average: 31%
Malaysia Philippines PR China
% share of
gross exports
12
% of GDP % of GDP
3Q 2017 BNM Quarterly Bulletin
17 November 2017
3.4
1.91.3
1.7
4.34.0
3.8
-2
-1
0
1
2
3
4
5
1Q 2Q 3Q 4Q 1Q 2Q 3Q
2016 2017
Others (29.5%)
Alcoholic beverages & tobacco (2.9%)
Transport (13.6%)
Housing, water, electricity, gas & other fuels (23.8%)
Food & non-alcoholic beverages (30.2%)
Headline inflation (Annual change, %)
Headline inflation declined to 3.8% in 3Q 2017
Inflation averaged lower due to lower transport
inflation
Headline Inflation
Note: RON95 petrol price is affected by movements in global oil prices and exchange rate
Source: Department of Statistics, Malaysia, Bloomberg, and Bank Negara Malaysia
Percentage point contribution
In the near term, inflation could remain elevated
amid rising global oil prices
6
1.50
1.60
1.70
1.80
1.90
2.00
2.10
2.20
2.30
2.40
30
35
40
45
50
55
60
65
1Q 2Q 3Q 4Q 1Q 2Q 3Q Oct 1-16Nov
2016 2017
Global crude oil price
RON95 petrol price (RHS)
USD/barrel RM/litre
Average Global Crude Oil Price and RON95 Petrol Price
13
3Q 2017 BNM Quarterly Bulletin
17 November 2017
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Nov-10 Nov-11 Nov-12 Nov-13 Nov-14 Nov-15 Nov-16 Nov-17
%
Overnight Policy Rate• The MPC will continue to assess the
balance of risks surrounding the outlook
for domestic growth and inflation
‒ More entrenched growth, lifted by
stronger spillovers from the external
sector
‒ Headline inflation is projected to
moderate in 2018, but dependent on
future global oil prices which are highly
uncertain
• Favourable economic prospects accord
greater flexibility to review the degree of
monetary accommodation
Monetary policy will ensure the sustainability of growth prospects
3.00
14
3Q 2017 BNM Quarterly Bulletin
17 November 2017
-0.02
0.2
-0.3
-2.1
0.04
1.9
1.5
3.1
1.4
-1.0
-1.0
-0.8
-0.2
-0.01
1.4
1.4
1.6
1.8
-5 0 5
IDR
INR
PHP
KRW
TWD
CNY
SGD
MYR
THB
3Q-17 2Q-17 % change
Ringgit continued to appreciate against the US dollar and most
regional currencies in the third quarter, but risks persist going forward
Source: Bank Negara Malaysia
Performance of Selected Currencies against the US dollar
The ringgit has been supported by positive
domestic developments; risks, however, persist
The ringgit was one of the best performers in
the region for two consecutive quarters
15
4.15
4.20
4.25
4.30
4.35
4.40
4.45
4.50
4.55
Jan-1
7
Feb
-17
Ma
r-1
7
Apr-
17
Ma
y-1
7
Ju
n-1
7
Ju
l-1
7
Au
g-1
7
Se
p-1
7
Oct-
17
No
v-1
7
De
c-1
7
Source: Bank Negara Malaysia
MYR/USD
Performance of Ringgit against the US dollar
MYR appreciation
● Strong export performance
● FMC announcement
● Stronger-than-expected 1Q
and 2Q GDP
14 Dec: ECB
meeting
Other lingering
risks
Geopolitical
tensions
between the
US and North
Korea
Economic
outlook of
major
economies
12-13 Dec: FOMC
meeting
3Q 2017 BNM Quarterly Bulletin
17 November 2017
FMC measures have brought in better liquidity in the onshore ringgit foreign exchange market
Source: Bank Negara Malaysia, Bloomberg
Note: Volatility refers to the difference between USD/MYR interbank intraday highest and lowest rate.
Offshore rate refers to the NDF 1-month rate while onshore rate refers to the spot rate.
4.5
6.2 6.1
7.8
0
2
4
6
8
10
Nov-16 Mar-17 Jun-17 Sep-17
228
6279
113
0
50
100
150
200
250
Nov-16 Mar-17 Jun-17 Sep-17
42
2327
32
0
10
20
30
40
50
Nov-16 Mar-17 Jun-17 Sep-17
360
145124
69
50
100
150
200
250
300
350
400
Nov-16 Mar-17 Jun-17 Sep-17
Average Volatility of USD/MYR
Average USD/MYR Bid-Ask Spread
Average daily turnover of MYR pairsUSD bn Points
Points
Points
Greater FX intermediation by the
market
More stable ringgit reduces business
uncertainty
Impact of offshore rates to onshore
has further reduced
FX transaction cost has reduced
for market participants
Greater balance of foreign currency
demand and supply
Further reduction in credit spread
lowered cost of borrowing
USD bn Basis
pointsAverage Daily 5-year CDS spreadNet Foreign Exchange Conversion
from Exports (Cumulative)
-0.5 1.4
3.6
7.3
-0.5
1.5
3.5
5.5
7.5
Jan - Nov-16
Dec-16 -Mar-17
Dec-16 -Jun-17
Dec-16 -Sep-17
151
108
88
68
50
70
90
110
130
150
170
Nov-16 Mar-17 Jun-17 Sep-17
Average Daily USD/MYR
Offshore-Onshore Gap
16
3Q 2017 BNM Quarterly Bulletin
17 November 2017129 13
39.6%
32.9%
18.7%
5.6%2.3%
0.4% 0.5%0
20
40
60
80
Asse
tM
ana
ge
me
nt
Ce
ntr
al B
anks/
Go
vern
me
nts
Pe
nsio
nF
unds
Ba
nks
Insura
nce
Com
panie
s
No
min
ees/
Cu
sto
dia
ns
Oth
ers
RM billion
29.7%
26.6%
0%
5%
10%
15%
20%
25%
30%
35%
0
50
100
150
200
250
300
Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17
% NR Holding
RM billionGovt Bond (LHS)
% NR of Govt (RHS)
Notes:
1/ Malaysian Government Bonds includes Malaysian Government Securities (MGS), Malaysian Government Investment Issues (MGII), and Sukuk Perumahan
Kerajaan (SPK).
2/ ‘Others’ include individuals, non-financial corporations and unidentified sectors
Source: Bank Negara Malaysia
Distribution of Non-resident Holdings of
Government Bonds as at end-Sep’17
Non-resident Holdings of
Malaysian Government Bonds
Non-resident holdings of Malaysian government bonds were slightly
higher as at end-Sep 2017 in line with ringgit performance
Majority of non-residents holdings are by
asset managers and Central Bank/Government
Higher non-resident holdings of
Malaysian Government bonds
17
3Q 2017 BNM Quarterly Bulletin
17 November 2017
Malaysia’s external debt remains manageable
Source: Department of Statistics, Malaysia and Bank Negara Malaysia
60.0%*
42.9%
22.1%
1998 3Q-17
Ringgit-denominated external debt
Foreign currency-denominated debt
*Based on previous definition of external debt
Foreign currency-denominated
debt remains low relative to
Asian Financial Crisis
Breakdown by Currency
(% of GDP)
Foreign currency-denominated
debt largely hedged and backed
by external assets
Breakdown by instruments
(% of total share)
Total:
65.0%
20
Interbank borrowings
28.5%Intercompany
loans17.5%
Bonds and notes28.0%
Loans6.4%
Others*2.3% Trade
credits10.3%
*Includes SDR allocations and miscellaneous, such as
insurance claims yet to be disbursed and interest
payables on bonds and notes
Subjected to prudent
liquidity management
practices and flexible terms
More than half of foreign-
currency denominated debt are
subjected to either prudential
safeguards or flexible terms
• Interbank borrowing and
non-resident deposits Prudent liquidity management
including limits on funding and
maturity mismatches
• Intercompany loansFlexible/concessionary terms
• Trade credits
Backed by export earnings
18
NR deposits
7.0%
3Q 2017 BNM Quarterly Bulletin
17 November 2017
-10
-8
-6
-4
-2
0
2
4
6
1Q
-97
3Q
-97
1Q
-98
3Q
-98
1Q
-99
3Q
-99
1Q
-00
3Q
-00
1Q
-01
3Q
-01
1Q
-02
3Q
-02
1Q
-03
3Q
-03
1Q
-04
3Q
-04
1Q
-05
3Q
-05
1Q
-06
3Q
-06
1Q
-07
3Q
-07
1Q
-08
3Q
-08
1Q
-09
3Q
-09
1Q
-10
3Q
-10
1Q
-11
3Q
-11
1Q
-12
3Q
-12
1Q
-13
3Q
-13
1Q
-14
3Q
-14
1Q
-15
3Q
-15
1Q
-16
3Q
-16
1Q
-17
3Q
-17
Capital Market
FX Market
Banking System
FCI
The Financial Conditions Index (FCI) indicates improving financial
conditions since 2016
Financial Conditions Index for Malaysia
(Bars are the variance decomposition of the index by markets)
• The FCI aggregates financial variables to summarise the current state of domestic financial conditions
• The estimated FCI for Malaysia has improved since 2016, mainly reflecting the decreased volatility in the
foreign exchange and equity markets.
Source: Bank Negara Malaysia estimates
Index
-1sd
Asian
Financial
Crisis
(6 Quarters)
Spillover from
Global
Financial Crisis
(4 quarters)
+2sd
+1sd
-2sd
Episode of exchange rate
depreciation and volatility
Indicates easing in financial
conditions
19
3Q 2017 BNM Quarterly Bulletin
17 November 2017
Source: Bank Negara Malaysia, Bloomberg
0
5
10
15
20
De
c-1
5
Ma
r-1
6
Jun-1
6
Sep-1
6
De
c-1
6
Ma
r-1
7
Jun-1
7
Sep-1
7
Bond Money Market Equity FX FI
Stress Level, %
(Stacked; Min=0; Max=100)
Market volatility remained low amid improved
domestic sentimentsFinancial Market Stress Index (FMSI)
Notable peaks
Asian Financial Crisis : 57.4%
Global Financial Crisis : 24.3%
Oil Plunge 2015 : 24.5%
Current (30 Sept.) : 3.0%
• Average volatility declined for 10-year
Malaysia Government Securities (MGS)
yields and the equity market.
• Low volatility partly attributed to
improved domestic sentiments amid
better-than-expected GDP growth in 2Q
2017
• Moving forward, investor sentiment will
be influenced primarily by external
developments.
Domestic financial markets remained orderly
20
3Q 2017 BNM Quarterly Bulletin
17 November 2017
Source: Bank Negara Malaysia
Banking sector 1Q 2017 2Q 2017 3Q 2017
Common equity tier 1 capital ratio (%) 13.1 12.9 13.2
Tier 1 capital ratio (%) 13.9 13.8 14.1
Total capital ratio (%) 17.0 17.0 17.1
Capital buffer (RM bil) 132.6 133.2 135.4
Net impaired loans ratio (%) 1.2 1.2 1.2
ROE (annualised) 11.8 12.7 12.8
Insurance/Takaful sector 1Q 2017 2Q 2017 3Q 2017
Capital adequacy ratio (%) - Insurance 246.1 238.5 234.5
Capital adequacy ratio (%) - Takaful 204.8 211.4 204.4
Capital buffer (RM bil) 38.2 37.1 35.4
Profitability (RM bil) 6.6 5.2 4.2
Excess income over outgo (RM bil) 6.1 4.4 3.5
Operating profit (RM bil) 0.5 0.8 0.7
Claims Ratio (%) 62.9 55.3 61.2
Domestic financial stability remains intact
• Financial institutions
capitalisation maintained at
strong levels
• Sufficient high quality capital
to manage adverse
developments
21
3Q 2017 BNM Quarterly Bulletin
17 November 2017
Financing to the private sector moderated since the previous quarter
While growth of corporate bonds was
sustained, net financing growth moderated,
driven by slower loan growth…
*Net financing comprises outstanding banking system and DFIs loans, and
outstanding corporate bonds
… contributed primarily by lower loan growth
to businesses other than SMEs
Contribution to Net Financing Growth* Outstanding Banking System and DFI Loan Growth by
Borrowers
6.4
0
1
2
3
4
5
6
7
8
9
10
1Q
15
2Q
15
3Q
15
4Q
15
1Q
16
2Q
16
3Q
16
4Q
16
1Q
17
2Q
17
3Q
17
Corporate Bonds
Banking System and DFI Loans
Total Net Financing
ppt, %
Source: Bank Negara Malaysia Source: Bank Negara Malaysia
Households, 4.9
Businesses, 5.4
Non-SMEs, 4.0
SMEs, 7.0
-5
0
5
10
15
20
1Q
15
2Q
15
3Q
15
4Q
15
1Q
16
2Q
16
3Q
16
4Q
16
1Q
17
2Q
17
3Q
17
Households Businesses
Non-SMEs SMEsyoy, %
22
3Q 2017 BNM Quarterly Bulletin
17 November 2017
Source: Bank Negara Malaysia
88.7
83.1
73.1
2.50
3.43
2
3
4
5
6
7
50
60
70
80
90
100
2Q
-15
3Q
-15
4Q
-15
1Q
-16
2Q
-16
3Q
-16
4Q
-16
1Q
-17
2Q
-17
3Q
-17
%%
Loan-to-deposit ratio
Loan-to-fund ratio
Loan-to-fund & equity ratio
Average cost of deposit (RHS)
KLIBOR (RHS)
136
60
80
100
120
140
160
0
100
200
300
400
500
600
3Q
-15
4Q
-15
1Q
-16
2Q
-16
3Q
-16
4Q
-16
1Q
-17
2Q
-17
3Q
-17
Other stock of HQLA
Ringgit surplus liquidity placed with BNM (incl. SRR)
Liquidity Coverage Ratio (LCR, RHS)
LCR min. requirement (RHS)
LCR min. requirement
RM billion Ratio, %
LCR well above the transitional minimum
requirement
Liquidity coverage ratio and liquid assets
Banks’ funding structure remained stable
Funding structure and cost of funds
Sufficient liquidity in the banking system to support intermediation
23
3Q 2017 BNM Quarterly Bulletin
17 November 2017
Source: Bank Negara Malaysia
4.9
7.9
0
3
6
9
12
15
0
500
1,000
1,500
2,000
2,500
2011
2012
2013
2014
2015
2016
2017
3Q
-17
Financial assets
Debt
Debt growth (RHS)
Financial assets growth (RHS)
RM billion Annual growth (%)
Fin. assets:
RM2.4 trillion
Debt:
RM1.1 trillion
84.6
177.7
123.6
0.0
0.5
1.0
1.5
2.0
-50
0
50
100
150
200
2011
2012
2013
2014
2015
2016
2017
3Q
-17
Others (RHS)
Credit Cards (RHS)
Personal Financing (RHS)
Passenger Cars (RHS)
Residential Properties (RHS)
Ratio
%Outstanding HH Debt
RM trillion
1.4
1.6
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
2011
2012
2013
2014
2015
2016
2017
Household: Delinquency ratio
Household: Impairment ratio
Ratio
%
3Q-17
Financial assets-to-GDP
ratio
Liquid financial assets-to-GDP
ratio
Debt-to-GDP ratio
Household debt growth
continued to moderate
Household Debts and Financial
Assets
Household financial assets
sustained at 2.1x of debt
Household Sector: Key Ratios Gross Impaired and Delinquent Loans
Sound asset quality of
household loans
24
Sustained debt servicing capacity of households
3Q 2017 BNM Quarterly Bulletin
17 November 2017
8.8
5
7
9
11
13
15
100
150
200
250
300
350
400
450
500
550
2014 2015 2016 2017
Outstanding financing
Annual growth (RHS)
2007-2015 average (RHS)
2010 - 2015 average (RHS)
RM (billion)Annual
growth (%)
Housing loans continued to grow
at a sustained pace
Source: Bank Negara Malaysia
’07-’15 avg: 11.5%
’10 -’15 avg: 12.9%
53.3
26.6
15.4
4.8
0
20
40
60
80
100
2013 2014 2015 2016 Sep-17
> RM1m
RM500k - RM1m
< RM500k
<RM250k (mainly first-time buyers)
%
About 71% of outstanding
loans are to first-time house
buyers priced <RM500K
• Access to financing for
first-time home buyers
maintained.
• Housing loan approval rate
stood above 70%, while
rejection rate remained
below 4-year average at
23.3.%
• Financing for speculative
house purchases remained
muted
Borrowers continued to have access to home financing, especially
first-time home buyers
25
3Q 2017 BNM Quarterly Bulletin
17 November 2017
48.6
8.3
1.4
0
2
4
6
8
10
12
14
16
0
10
20
30
40
50
60
1Q
-14
2Q
-14
3Q
-14
4Q
-14
1Q
-15
2Q
-15
3Q
-15
4Q
-15
1Q
-16
2Q
-16
3Q
-16
4Q
-16
1Q
-17
2Q
-17
Debt-to-equity ratio
Interest coverage ratio (RHS)
Cash-to-short-term debt (RHS)
% times
Overall debt servicing
capacity sustainedLeverage, debt servicing capacity
and liquidity indicators
Source: Bank Negara Malaysia
2.7
2.2
2.4
2.6
2.8
3.0
1Q
-14
2Q
-14
3Q
-14
4Q
-14
1Q
-15
2Q
-15
3Q
-15
4Q
-15
1Q
-16
2Q
-16
3Q
-16
4Q
-16
1Q
-17
2Q
-17
3Q
-17
Business: Impaired loans ratio
SMEs: Impaired loans ratio
%
Impairments remained low,
despite upticks in some sectorsGross impaired loans
0
500
1,000
1,500
19
98
20
08
20
12
20
13
20
14
20
15
20
16
3Q
-17
External Debt
Domestic Corporate Bonds/Sukuk
Domestic Loans
RM billionAnnual growth : 7%
Continued access to financing
for businesses, including SME
Domestic and external debt
Businesses, including SMEs continued to have access to financing
26
45%
29%
26%
2.6
3Q 2017 BNM Quarterly Bulletin
17 November 2017
Financial institutions remain the largest source of financing for SMEs
Source: Bank Negara Malaysia, SME Corp, Securities Commission
Services63%
Manufacturing 15%
Construction13%
Agriculture6%
Others3%
22 20
22 21
13 13
43 46
0
20
40
60
80
100
Applications Approvals
0-3 years 4-7 years
8-10 years >10 years
97% of financing to SMEs
are from financial
institutions (BIs and DFIs)
FIs extend financing to
SMEs across the spectrum
One in 5 SMEs financing
approvals are to start-ups
Financing Outstanding to SMEs FIs Financing to SME by Sectors Share of SME Applications and
Approvals
Share (%)
27
DFIs
14.7
Government Funds and Schemes a
5.9
Venture Capital b
2.9
Factoring and Leasing b
0.8
BIs
295.9
a SME Annual Report 2015/16
b As at end-2016
RM bil
3Q 2017 BNM Quarterly Bulletin
17 November 2017
Property imbalances pose significant risks to the overall economy
in the event of a shock
With linkages to over 120 industries, vulnerabilities in the property market pose risks to the wider economy, as
observed during the Asian Financial Crisis
Record-high unsold residential
units, mainly above RM250k
Note: Total unsold includes overhang properties and unsold under construction. Estimates include SOHO and serviced apartments.
Source: NAPIC, DOSM, Jones Lang Wootton and Bank Negara Malaysia estimates
1Q 2012 1Q 2017
Above RM250k
Below RM250k
36%
share
83%
share
54,244 units
130,690 units
24%
2021f:32%
18%
0
5
10
15
20
25
30
35
1996 2003 2010 1Q2017
Klang Valley
Malaysia
Regional Average 1Q 2017:
6.6%
%
Penang
Johor
Incoming Supply
(2017 Onwards)
15.8
msf
1.5x
existing
supply
0.4x
existing
supply
Klang
Valley
0.7x
existing
supply
44.0
msf
5.6
msf
High office vacancy rates,
particularly in Klang Valley140 new malls to enter the market in
key states by 2021
Office Vacancy RatesUnsold Residential Units
28
64%
share 17%
share
3Q 2017 BNM Quarterly Bulletin
17 November 2017
Given the continued strong growth performance in the third quarter, the Malaysian
economy is on track to register stronger growth of 5.2 – 5.7% in 2017
Growth prospects continue to be supported by domestic demand and continued
strength in exports
− Continued wage and employment growth
− New and on-going implementation of infrastructure projects
− Improvement in global growth, especially among Malaysia’s key trading partners
Strong and resilient macroeconomic fundamentals accord Malaysia the ability to
manage current challenges and pursue structural reforms
Malaysian economy to register higher growth in 2017
2129
3Q 2017 BNM Quarterly Bulletin
17 November 2017
Highlights of the
Bank’s Policy Initiatives on Corporate
Governance of Financial Institutions
30
3Q 2017 BNM Quarterly Bulletin
17 November 2017
Nov 1985 Nov 1994 June 2013 Aug 2016
Guidelines on
responsibilities
of Directors and
Appointment of
Chief Executives
Revision of 1985
guidelines:
• At least 2
independent
directors on
board
• Number of
executive
directors
restricted to 3
• Strengthened
expectations for group
wide governance
• Independent directors:
tenure should not exceed
9 years
• Number of executive
directors restricted to 1
• Independent directors
must form board majority
Apr 2011
FIDE programme
(for all directors
(compulsory)
• Codification of functions
and duties of board in FSA
2013 and IFSA 2013
• Strengthened fit and
proper criteria for directors
• Number of executive
directors restricted to 2
• Independent directors
must form at least 1/3 of
board members
Stronger board independence
Expanded scope of board
deliberation
1
Improvement in competency,
composition and commitment
of Board members
3
2
Key observations …
May 2003
Requirement to
establish board sub-
committees for
nomination,
remuneration and risk
management matters
Mar 2005
• Separation of
roles between
Chairman and
CEO
• Chairman of
the board
must be non-
executive
Evolution of corporate governance standards has elevated the quality of board oversight in financial institutions
31
3Q 2017 BNM Quarterly Bulletin
17 November 201777
Q & A
32
3Q 2017 BNM Quarterly Bulletin
17 November 2017
The Malaysian economy recorded a higher growth of 6.2% in the third quarter of 2017
2133
Real GDP
(Annual change, %)
Share, %
(2016)
2016 2017
Year 1Q 2Q 3Q
Domestic demand
(excluding stocks)91.6 4.3 7.7 5.7 6.6
Private Sector 70.1 5.6 8.2 7.2 7.3
Consumption 53.2 6.0 6.6 7.1 7.2
Investment 16.9 4.3 12.9 7.4 7.9
Public Sector 21.5 0.4 5.8 0.2 4.1
Consumption 13.1 0.9 7.5 3.3 4.2
Investment 8.5 -0.5 3.2 -5.0 4.1
Net exports of
goods
and services
8.4 1.5 -14.5 1.4 1.7
Exports 70.4 1.1 9.8 9.6 11.8
Imports 62.1 1.1 12.9 10.7 13.4
Change in stocks
(RM billion)0.0 0.3 1.8 -0.4 -2.0
GDP (y-o-y) 1001 4.2 5.6 5.8 6.2
GDP (q-o-q growth,
seasonally
adjusted)
- - 1.8 1.3 1.8
Real GDP
(Annual change, %)
Share, %
(2016)
2016 2017
Year 1Q 2Q 3Q
Services 54.3 5.6 5.8 6.3 6.6
Manufacturing 23.0 4.4 5.6 6.0 7.0
Mining and
Quarrying8.8 2.2 1.6 0.2 3.1
Agriculture 8.1 -5.1 8.3 5.9 4.1
Construction 4.5 7.4 6.5 8.3 6.1
GDP (y-o-y) 1002 4.2 5.6 5.8 6.2
Note: 2 Numbers do not add up due to rounding and exclusion of import duties
component
Source: Department of Statistics, Malaysia
Add. Info
1
Note: 1 Numbers do not add up due to rounding
Source: Department of Statistics, Malaysia