May 16, 2013
Property price Malaysia | Moody Investors Service has raised concern over Malaysia's spiralling property prices and high household debt.
By Ranjit Singh
KUALA LUMPUR: International credit agency Moody Investors Service has raised concern over Malaysia’s spiralling property prices and high household debt that may have an adverse impact of the country banking sector.
A report released yesterday, however, said the country’s banking sector is expected to remain strong and resilient in the next 12 to 18 months.
The rating agency said that efforts taken by the country central bank in 2012 to cool the red hot property market such as to reduce the loan to value ratio had resulted in some softening of prices.
It said that moving forward, it was mindful of the risk of further price corrections in the Klang Valley should the environment become less accommodative, as these areas have experienced significant price increases in the recent years.
Household debt was another area of concern as it had grown from 75.8% as a percentage of gross domestic product (GDP) in 2011 to 80.5% at the end of 2012.
Although banks tightened their lending after Bank Negara Malaysia implemented guidelines for responsible financing which were implemented in January 2012, non bank financial institutions continued to expand their share of consumer credit particularly in the unsecured personal loans segment. These loans were mainly advanced to the lower income group which earned less than RM3,000 per month and could be a hazard to the banking sector in a rising interest rate environment, said the report.
The rating agency confidence in the banking sector was stoked by the incumbent ruling party win in the 13th General Election, accomodative government policies and GDP growth, which the company estimates to be in the 5% region for 2013.
On another note, Moodyç—´ has pegged loan growth for the domestic banking sector to be in the region of 10% this year.
In relation to the levels of impaired assets of the banking sector, Moody opined that the downside was limited as the impaired assets levels were already at record lows at the current 2% level.
Any upward movement in interest rates could also have an adverse impact on export oriented manufacturers, high loan to value mortgages and highly leveraged households, which currently account for 20% of the loans in the banking sector.
Moody said that based on the capitalisation levels of Malaysian banks, they are well positioned to meet the higher capital requirements under Basel III.
Liquidity in the banking sector is expected to remain robust given that the current loan to deposit ratio is around 79% and availability of longer term funding that banks can obtain from debt markets.
Moody stress test on Malaysian banks indicates that the loss absorbing buffers would allow them to sustain considerable deterioration in asset quality.
This content is provided by FMT content partner The Malaysian Reserve.
Source reference link: https://www.freemalaysiatoday.com/category/business/2013/05/16/concern-over-property-price-spiral/
Back to Main Page: www.VulcanPenangProperty.blogspot.com | International Page:www.VulcanInternational.blogspot.com
Property price Malaysia | Moody Investors Service has raised concern over Malaysia's spiralling property prices and high household debt.
By Ranjit Singh
KUALA LUMPUR: International credit agency Moody Investors Service has raised concern over Malaysia’s spiralling property prices and high household debt that may have an adverse impact of the country banking sector.
A report released yesterday, however, said the country’s banking sector is expected to remain strong and resilient in the next 12 to 18 months.
The rating agency said that efforts taken by the country central bank in 2012 to cool the red hot property market such as to reduce the loan to value ratio had resulted in some softening of prices.
It said that moving forward, it was mindful of the risk of further price corrections in the Klang Valley should the environment become less accommodative, as these areas have experienced significant price increases in the recent years.
Household debt was another area of concern as it had grown from 75.8% as a percentage of gross domestic product (GDP) in 2011 to 80.5% at the end of 2012.
Although banks tightened their lending after Bank Negara Malaysia implemented guidelines for responsible financing which were implemented in January 2012, non bank financial institutions continued to expand their share of consumer credit particularly in the unsecured personal loans segment. These loans were mainly advanced to the lower income group which earned less than RM3,000 per month and could be a hazard to the banking sector in a rising interest rate environment, said the report.
The rating agency confidence in the banking sector was stoked by the incumbent ruling party win in the 13th General Election, accomodative government policies and GDP growth, which the company estimates to be in the 5% region for 2013.
On another note, Moodyç—´ has pegged loan growth for the domestic banking sector to be in the region of 10% this year.
In relation to the levels of impaired assets of the banking sector, Moody opined that the downside was limited as the impaired assets levels were already at record lows at the current 2% level.
Any upward movement in interest rates could also have an adverse impact on export oriented manufacturers, high loan to value mortgages and highly leveraged households, which currently account for 20% of the loans in the banking sector.
Moody said that based on the capitalisation levels of Malaysian banks, they are well positioned to meet the higher capital requirements under Basel III.
Liquidity in the banking sector is expected to remain robust given that the current loan to deposit ratio is around 79% and availability of longer term funding that banks can obtain from debt markets.
Moody stress test on Malaysian banks indicates that the loss absorbing buffers would allow them to sustain considerable deterioration in asset quality.
This content is provided by FMT content partner The Malaysian Reserve.
Source reference link: https://www.freemalaysiatoday.com/category/business/2013/05/16/concern-over-property-price-spiral/
Back to Main Page: www.VulcanPenangProperty.blogspot.com | International Page:www.VulcanInternational.blogspot.com
Back to Main Page: www.VulcanPenangProperty.blogspot.com | International Page:www.VulcanInternational.blogspot.com
