Financial markets improved significantly in December

Bank Negara also noted that the banking system asset quality remains healthy despite rising impairments.

KUALA LUMPUR: The domestic financial markets improved significantly in December as global investor sentiment continued to improve amid expectations for an eventual normalisation of economic activities, says Bank Negara.

This occurred despite some concerns on the potential slowing down of the global economic recovery, as several major economies introduced additional lockdown measures amid surges in Covid-19 infections during the month. The better sentiment was also helped by major economies authorising the use of Covid-19 vaccines.

“Consequently, global and regional equity indices recorded gains, reflecting higher investor risk appetite for riskier assets. Similarly, the FBM KLCI increased by 4.1%.

“The improved investor risk appetite also led to non-resident portfolio inflows into the domestic bond market amid yield-seeking activities by global investors. As a result, the 10-year MGS declined by 9 basis points and the ringgit appreciated by 1.4% against the US dollar, ” the central bank said in a statement.

Net financing continued to expand amid a moderation in total outstanding loan growth (December: 3.4%; November: 3.8%) while outstanding corporate bond growth was sustained at 6.5% (November: 6.7%).

Outstanding household loan growth remained at 5% in December as loan disbursements increased and remained higher than the historical average (December: RM33.1bil; November: RM29.7bil). However, outstanding business loan growth declined to 0.5% in December (November: 1.2%) due to a high base effect in

December 2019. Nonetheless, disbursements increased driven by higher working capital loans.

Bank Negara also noted that the banking system asset quality remains healthy despite rising impairments.

Gross impaired loans ratio continued to inch upwards, returning to levels comparable to 2019 (December 2020: 1.6%; November 2020: 1.5%).

Banks continued to set aside additional provisions as a precaution against future credit losses with the total provisions to total loans ratio increasing to 1.7% in December (November: 1.6%).

“Borrowers that remain affected by the challenging conditions continue to receive needed support from banks through targeted repayment assistance, ” Bank Negara said.

For 2020, average headline inflation was lower at -1.2% (2019: 0.7%) reflecting substantially lower global oil prices. Core inflation remained positive, averaging at 1.1% (2019: 1.5%). -- Bernama

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