KUALA LUMPUR: Seasonally adjusted bank lending for the purchase of securities in Malaysia could stabilise in line with the equity market, says Nomura Global Markets Research.
It said on Monday its proprietary Financial Imbalance Risk Indicator (FIRI) fell for the second month in its latest reading for April.
This was driven by modest declines in seasonally adjusted equity prices of 0.9% on-month and 0.5% in February and March, respectively, after the sharp 4.5% jump in January.
“Seasonally adjusted bank lending for the purchase of securities rose sequentially in January and February, but could stabilise in line with the equity market, all else equal.
“The equity market is one area that Bank Negara Malaysia monitors for signs of a potential 'misallocation of resources and the disintermediation of funds towards speculative activity in asset markets',” it said.
Nomura Research pointed out that financial imbalance risks are, in turn, an important driver for Bank Negara's policy decisions to prevent a build-up of financial imbalance risks.
The research house said consequently, the recent stabilisation in FIRI should reflect less need for another rate hike this year.
In addition, Bank Negara no longer views the policy stance as “accommodative” , which further supports its forecast for the central bank to leave its policy rate unchanged for rest of the year.
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