KUALA LUMPUR, July 30 — The headline inflation for June 2020 decreased to -1.9 per cent in June compared with -2.9 per cent in May, driven largely by the higher domestic retail fuel prices during the month.

Bank Negara Malaysia (BNM) in its monthly highlights today said that the risk of deflation remains contained as underlying inflation, as measured by core inflation, increased slightly to 1.2 per cent. 

“The higher share of consumer price index items recorded month-on-month price increases (June: 44 per cent; May: 36 per cent), suggesting a further normalisation of price pressures,” it said. 

The note added that exports registered a turnaround to grow by 8.8 per cent in June compared with a contraction of 25.5 per cent in May, supported by higher manufactured exports, particularly electrical and electronics as well as non-resource-based products such as optical and scientific equipment, machinery as well as equipment and parts.

“Following the trough in May 2020, exports are expected to gradually pick up in the second half of 2020, as external demand improves with the easing of containment measures in most economies,” it said. 

BNM said total outstanding loans grew by 4.1 per cent in June compared with 3.9 per cent in May, supported by higher outstanding household loans. 

Outstanding corporate bond growth increased to 2.5 per cent compared with 1.9 per cent in May. 

“The higher household loan growth, which stood at 3.5 per cent in June compared with 3.2 per cent in May, was mainly contributed by housing and securities loans amid higher disbursements. 

“Outstanding business loan growth moderated to 4.2 per cent compared with 4.5 per cent in May as repayments expanded faster than disbursements. Of note, disbursements normalised from the low levels during April and May, with high disbursements for working capital needs,” it said. 

Meanwhile, the domestic financial markets recorded a mixed performance in June.

“Non-resident portfolio inflows amounted to US$2.0 billion, mainly to the bond market, and led to the appreciation of the ringgit by 1.6 per cent against the US dollar,” it said, 

It added that the 10-year MGS yield increased marginally by six basis points, due mainly to external factors.

“During the earlier part of the month, MGS yields increased in line with regional bond markets, reflecting higher US Treasury yields following better-than-expected US employment data, which led to investors shifting funds away from global safe-haven assets. 

“The FBM KLCI has continued on an upward trend in June, increasing by 1.9 per cent during the month, driven by continued support from domestic investors,” it said.             The central bank said the banking system liquidity coverage ratio increased to 149.2 per cent  (May 2020: 140.2 per cent) amid a shift from wholesale funding towards deposits.

“As such, loan-to-fund and loan-to-fund-and-equity ratios remained stable at 82.1 per cent and 71.5 percent, respectively,” it said, 

It added that overall, gross and net impaired loan ratios improved slightly to 1.5 per cent and 0.9 per cent respectively as some loans turned performing during the month.

“Banks continue to gradually set aside provisions as a precaution against future credit losses,” it said. 


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