I hope TNB reconsiders buying 1MDB's power assets

From MalaysiaKini:

WSJ added that Goldman Sachs, which received a handsome commission for raising US$3 billion (RM11.22 billion) in bonds for 1MDB, was pressed to do so quickly shortly before the general election.

"Goldman Sachs Group Inc arranged the bond sale and took on extra risk to get the deal done quickly at 1MDB’s request, according to a person familiar with the matter, earning unusually high profits as a result," it said.

Shortly after the general election, Kinibiz reported that Genting made an unexpected RM190 million in donations, believed to be related to the election.

It's noted that 1MDB took a 1.2 billion dollar impairment charge on those power assets, but it puts into question the actual worth of the power plants under the 1MDB name.  Did it overpay for all the other plants as well in return for "political contributions"?

Tenaga I hope will rethink their strategy over these power plants.  Buying them is good, but if they overpay, it could be negative.  It's very much on Tenaga to do an objective purchase of these power plants.  At some point all GLCs seem to have limited upside potential, the rally was good while it lasted.

Top Glove impressive earnings

From the Edge:

Top Glove’s third quarter of financal year 2015 (3QFY15) net profit of RM72.3 million exceeded ours and consensus’ expectations by a variance of more than 7%. Cumulative nine months (9MFY15) net profit of RM177 million accounted for 82.1% and 83.4% of ours and consensus’ full-year forecasts, respectively.

The growth in Top Glove’s revenue was mainly attributable to the increase in sales volume by 6% year-on-year (y-o-y) in 9MFY15 and a stronger US dollar against the ringgit. The increase in sales volume stemmed from both of its main glove segments, namely natural rubber gloves, which increased 9% y-o-y, and nitrile gloves, which increased 18% y-o-y. During the quarter, the average exchange rate for the US dollar against the ringgit was RM3.64 to US$1.

Meanwhile, the group’s 9MFY15 profit after tax and minority interests grew substantially by 19.5% y-o-y to RM177 million. The surge in earnings was mainly due to lower operating expenses, lower minority interest and a stronger US dollar against the ringgit. The operating expenses for 9MFY15 fell 1.4% due to the decommissioning of several old plants supported by the ongoing internal improvements in quality, efficiency and cost control measures. These lower operating expenses translated into better operating profit margin, especially for its Malaysian and Chinese operations.

The 9MFY15 margin for Malaysia is 13.7%, while that for China is 6.3%. The higher margins were mainly from its higher production of nitrile gloves, which carries a higher margin compared with natural rubber gloves.

Most people would think the rubber glove industry is a mature industry.  Apparently most people are wrong and Top Glove is proving it.  They were able to lower the costs of gloves.  This should not happen in a mature industry.  They will be reaping profits like no tomorrow until the others catch up.

Looks like most of the other glove makers are behind the curve.

Human trafficking the reason Digi is down?

Digi is one of the largest companies and its share has been rip roaring.  But why is it not doing well this year?

From the Edge:

(May 8): President Barack Obama’s effort to build the largest trade alliance in the Pacific faces a roadblock in the Senate, where a bill to give the White House "fast track" authority  in trade negotiations is hung up over Malaysia’ dismal record on human trafficking.  On Wednesday, the road to the Trans Pacific Partnership got even rockier, thanks to Democratic Senator Robert Menendez.

The president and Senate Republicans find themselves on the same side here, pushing for a trade promotion authority measure that would force Congress to take an up-or-down vote on trade pacts -- including Obama's TPP -- without adding any amendments.

The Pacific trade pact, which is still being negotiated, is a vital to Obama's legacy and potentially the keystone of the administration’s oft-criticized rebalance to Asia.

Menendez last month added an amendment to the fast-track measure that would ban that trade status to any country that the State Department classifies as a Tier 3 (the worst level) violator on human trafficking. Malaysia, which aspires to be part of TPP, is Tier 3. And Mendendez heightened that pressure this week in a Senate Foreign Relations Committee hearing, where he openly questioned whether the White House was putting inappropriate pressure on the State Department to move Malaysia to the less-odious Tier 2.

The whole human trafficking fiasco has put Malaysia in a hard place.  On one had it may choose to try and go for the TPP.  This would entail immigration crackdowns and deportation.  On the other hand, it could continue to do what they are doing and just keep going down the same route of lax enforcement of immigration.

For those who don't know, Malaysia has massive amounts of foreign workers.

The reason why Digi has gone up so much was on the back of migrant workers.  Digi is the lowest prepaid provider.  For cash strapped migrant workers, this is their communication source and Digi benefits the most.

If Malaysia puts a stop to the migrant worker inflow, yes Digi will go down.  But honestly I don't see this happening.  Malaysia needs labor to construct its mega projects over the next few years.  Digi is  shaping up to be a nice buy.  I think TPP inclusion is secondary at this point in Malaysia's eyes.

Eco World

From the Edge:

KUALA LUMPUR (June 17): Eco World International Bhd (EWI), a special purpose entity set up by the major shareholders of Eco World Development Group Bhd ( Financial Dashboard) to acquire real estate assets for development overseas, has withdrawn its plans to list as a special purpose acquisition company (SPAC) that was to raise RM1.5 billion from the exercise.

Instead, the property company is seeking a direct listing on the Main Market of Bursa Malaysia, looking to raise a higher sum of RM2 billion.

EWI would have been the country's first property SPAC.

EWI executive vice-chairman Tan Sri Liew Kee Sin said it will file an initial public offering (IPO) application within the next three months.

"We are planning to list the company by the end of this year," he told a press conference on Eco World’s second-quarter financial results and EWI update today.

 I can't think of another company quite like Eco World in Malaysia.  I can think of two very relevant companies in the world similar to Eco World, Apple and Tesla.

You might be thinking, no way Eco World compares to Apple and Tesla.  But they are similar in one major area.  I call it the psycho factor.  Tesla is a car company and people go nuts over their cars.  There are Tesla car club members. I never heard of a car club until I heard of Tesla.  In the same regard, when Apple products launch, you can see people queuing up around the block to get the newly released apple product.

Eco World has the same psycho effect on crowds.  Queue's of people lining up at 6 am to try and get the newest project launch.  What other companies do you know that drive people into a psycho frenzy whenever they launch something new?

Economics of selling and buying a new car

I decided to deviate slightly off the share market topic and write about buying and selling used cars.  Everyone will have to buy and sell used cars at sometime in their life.  So I think people will find this post useful.

Buying and selling used cars are interesting because mainly there are so many used cars of all shapes and sizes.

I myself am trying to sell off an old 1995 BMW 3 series e36.  It's not a bad car, I happen to think of all the models in that era, it is one of the nicest for its class.

Here are some the buying and selling used car economics:

1.  Every 5 years your car will approximately decrease in value by 50 percent.   

Judging by this, usually the best value of a car is gotten around the 10 year mark.  By that time, the car will be over 75% lower than its sale price.  Assuming a car is 75k at year 10, If you would buy at 10 year and sell at the 15 year mark, the cost would be 8k per year.    If you would buy at the 10 year mark and sell at the 20 year mark, the cost would be 5-6k per year.  But this is without the maintenance charges.

2.  Best time to buy a used car is after the model changes, and the best time to sell is just before the model changes.

This is super interesting.  The main reason for this anomaly is the difference between model changes is usually quite drastic, producing sort of a step pattern price chart.  I found the difference between a 2008 model now and a 2005 bmw model is not much different only about 10k difference, while a 2004 model is half the price of the 2005 model.  Unfortunately most people won't be able to take advantage of this because they will need to buy and sell their car and the same time.

3.  People will generally want to keep the best car of that era for as long as possible and would rather not sell it if they could.  

This is a postulation of sorts and can't be proven, but I'd argue that the best car in class for that era, people would not want to sell it.  And therefore supply limited while demand for that car would still be there.

4.  Resale probabilities of smaller engine cars are better than larger engine cars due to the Malaysian road tax system.

At this price level, Road tax is a significant percentage of the car's cost.  2.5 to 3 litre engines are less in demand due to 1.6k road tax per year.

5.  At 20 years old, the highest resale value does not always equal the easiest to sell.  After all if a dealer has 5 used cars of that era, it is unlikely he will take another one on.

Common cars at 20 years old become hard to sell as the market is flooded with these types of cars and the market for old cars isn't a huge one.

The only part of these rules which I'm not fully confident on is part 3 and 5.  These are kind of speculatory and not proven and also have exceptions.  At any rate most of these can be confirmed with a call to your used car dealer.

Industrial Production. Not a tier 1 indicator

From the Edge:

KUALA LUMPUR: Malaysia’s Industrial Production Index (IPI), which tracks overall industrial activity, grew at a slower pace of 4% year-on-year (y-o-y) in April 2015, compared with a revised 7.1% y-o-y in March.

According to the Department of Statistics, the slower growth was driven by an increase in outputs in the manufacturing, mining and electricity sectors. The manufacturing, mining and electricity indices recorded production growth of 4.1%, 3.9% and 3% respectively, according to the latest statistics.

The IPI figure was below market consensus of 4.5%.

In seasonally adjusted terms, the IPI in April 2015 recorded a marginal decrease of 0.4% month-on-month, following declines of 1% in manufacturing, 1.9% in mining and 1% in electricity. Under the manufacturing sector, output growth of 4.1% y-o-y was recorded in April, driven by increases in petroleum, chemical, rubber and plastic products (3.6%), electrical and electronics products (4%) and food, beverages and tobacco (5.5%). The mining sector registered growth of 3.9%, thanks to the increase of the crude oil index of 15%.

The slower April IPI pace comes after the implementation of the 6% goods and services tax (GST) which took effect on April 1, hurting consumer spending and demand.

For the first four months of the year, overall IPI rebounded by 5.8% against 4.7% growth a year ago.

While the IPI does tell a lot of about what the industries are doing, it isn't likely to be considered a reliable share market indicator, at least not in the near term.

The problem with production is that while factories produce, it won't necessarily sell at the consumer level just yet.  The product could sit on the shelves for some time and then translate to sales.  This is especially true for electronic products, some foods (not all), and non perishable items.

The factories could also produce items just for restocking as the recent GST has brought consumption forward quite a bit as consumers purchase items pre-GST.  We don't know and won't know how it affects consumption and growth.  I consider it a non-event.  Nothing is better than jobs, consumption, and exports for determining GDP.

Gas Malaysia doesn't rise with the news

From the Edge:

KUALA LUMPUR: The share price of Gas Malaysia Bhd ( Financial Dashboard) fell by 1.06% yesterday, despite analysts expecting the company to get an earnings boost from the latest natural gas tariff hike. The counter closed down three sen at RM2.80 yesterday, giving it a market capitalisation of RM3.6 billion.

Gas Malaysia on Tuesday announced that gas prices supplied to commercial and industrial sectors in Peninsular Malaysia will rise by an average of 10.3% from July 1, citing higher buying price of the fuel that it procured fromPetroliam Nasional Bhd.

Describing the move as a positive surprise, analysts are predicting the hike to boost Gas Malaysia’s earnings per share (EPS) growth by between 25% and 38% in the next three years.

In a report yesterday, Affin Hwang Capital analyst Lim Tee Yang said Gas Malaysia is set to see better profit margins, which is a boost to dividends.

“With the revision in gas tariff, we estimate Gas Malaysia may now be earning a higher spread of RM1.67 per million British thermal units (mmBtu) even after taking into account the usual increase of RM1.50 per mmBtu to Gas Malaysia’s purchasing price,” he said.

“This marks a significant improvement over our previous estimate where Gas Malaysia earned a spread of only slightly over half its historical spread (RM2.02 per mmbtu),” he added.

People are surprised this news doesn't lift the counter.  If we look over the last few weeks, the news is probably a non event as likely it has been baked into the price.  Someone probably knew on the inside that the tariff will probably be favorable and made a ton of money on it.

For investors and big funds, earnings are important and the market is in a "show me the money" mode.  It isn't in the mood for hanky panky, show me good earnings first.  Will the 3rd and 4th quarter be good year over year?  I'm not too sure even with the tariff change.  I don't think anyone is.  Lets wait until the third and fourth quarter to see whether Gas Malaysia will be a buy.  Because as of its latest earnings, it isn't.

PKR Azmin Ali doesn't seem to get it

From the star:

SHAH ALAM: Feuding Pakatan Rakyat partners PAS and DAP must not forget that their elected representatives were voted in by the people.

In view of this, both parties should bury the hatchet and continue serving the people under the Pakatan banner, said Selangor Mentri Besar Azmin Ali.

"Of course we have differing opinions, but as elected representatives, we also have a big responsibility towards the people who voted for us," Azmin told reporters after attending the monthly gathering for the state's civil servants.

He added that if not for the people's mandate, Pakatan Rakyat would not have formed the government in Selangor.

"When the people supported us in the last election, they placed their hopes on us. So we have to put aside all our problems, ego and personal grievances for the people," said Azmin.

He said Pakatan had gone through many tests in the past and found solutions for all.

Pakatan had plunged into a major crisis after DAP and PAS reignited their long time feud. To make matter worse, the Islamist party's cleric council passed a motion to severe ties with DAP during the recent PAS Muktamar.

PKR Azmin Ali seems to want to make peace between PAS and DAP.  He must think this is the same old PAS.  New leadership means new problems and unfortunately if the new leadership wants to go in a different direction, not much can be done.

This is not about egos as the people have changed.  If it is the same people, hurt feelings can be mended as the principles behind the two parties has unlikely changed.  This about principles and PAS has new principles in wanting to pursue its own agenda and from what I read the new leadership probably has never been pleased with what it had to give up as part of PR.  PAS is not about the rakyat anymore.  Sorry...recognize what is happening and stop wasting time.

Focus on Ringgit Fundamentals?

From the Edge:

KUALA LUMPUR: The government will focus on the country’s fundamentals amid concerns over the weakening ringgit, which hit its lowest level since September 2006 to touch 3.7665 versus the US dollar yesterday, said Minister in the Prime Minister’s Department Datuk Seri Abdul Wahid Omar.

“I am not able to comment on the value of the (local) currency, but despite the weakening trend, we will still stick to focus on our (economic) fundamentals,” he told pressmen after opening the Second National Economic Summit organised by the Asia Strategy and Leadership Institute here yesterday.

According to Reuters, the ringgit hit a nine-year low and the Indonesian rupiah set a fresh 17-year low yesterday, after robust US jobs data bolstered expectations of an interest rate hike by the US Federal Reserve before year-end. The rupiah fell to as low as 13,380 against the greenback, its lowest level since August 1998.

Asked if concerns over the beleaguered 1Malaysia Development Bhd (1MDB) are part of the root cause that dragged the local currency, Abdul Wahid said in regards to the local financial system, the strategic development company poses no systemic risk.

“The financial system is stable, the banks are well capitalised, and the government has implemented steps to widen the revenue base so as to sustain through any implication,” he said.

The currency world is an extremely fickle market.  Fundamentals can turn on an instant regarding exports and imports.  But what is really ailing the Ringgit?

I for one think the ringgit is way oversold at this time as fundamentals don't reflect reality Right now.  But likely it will reflect the state of the Ringgit in the near future.  I've talked about how the Deficit as a percent of GDP is crucial in the banking industry.  Massive cash calls are inbound if Malaysia doesn't get 4 percent GDP growth in 2015.

The GST will likely have an effect most are not predicting.  4-5 percent GDP growth?  Granted 5 percent GDP growth happened for the 1st quarter.  If we say the remaining GDP growth for the next 3 quarters are 0 percent.  The average is likely 1.5 percent GDP growth for the year.

What 0 percent GDP?  are you crazy.  It may not happen but its not a crazy number.  GST has been shown to decrease GDP worldwide over a quite a few countries. Every 1 percent tax is roughly equivalent to 1 percent reduction in GDP.  We have 6 percent GST in April.  By this oversimplified comparison, negative 1 percent GDP for the next 3 quarters is the real number.  That puts our GDP at just over 0.5 percent for 2015.

DAP ups the ante with PAS

From the Malaysian Insider:

Unlike Penang, PAS cannot be made to let go of its posts in the Selangor government because of the seat composition in the legislative assembly.

And as much as some DAP members feel that PAS should make good on its motion and relinquish its posts in the Selangor government, the pull of electoral success and power in the state may see PAS's leadership avoid it.

Political analyst Wan Saiful Wan Jan said PAS's leadership would not put the motion into practice because of the money and influence it would lose in Selangor.

DAP organising secretary Anthony Loke said for now, it is status quo in the Selangor government until the party made an official stand regarding the latest developments in PAS.

Loke said in Selangor, appointments to almost all official posts were negotiated based on each party’s strength in the Selangor assembly.

I don't like to be the foreteller of bad news.  But sometimes predictions come to fruition in funny ways.  Recall I said the best way for PKR to survive and grow as a party was to cut ties with PAS due to their conservative leadership change.  Things just won't be the same.

I thought it would be PR coalition dumping PAS.  But now PAS wants to dump the PR coalition.  Like a slighted woman under constant criticisms by its partners, they've had enough.  But who's house are they going to stay under?  They've gotten used to city living and some of the perks that come with the coalition.  It's hard to go back to where they came from.

I feel a lot of people voted for PAS because they were part of the PR coalition.  If PAS were to leave, PKR will benefit as they will take some seats from PAS in Selangor.

Perhaps its DAP which realizes its best just to cut ties with PAS and goad them into taking the rash route and getting out of the party.  PKR seems like they are a little worried , but really they shouldn't.  A lot of people voted for PAS because PKR didn't field candidates against them.  In next election, PKR should realize how strong they are without PAS.

PKR is the only party that seems unsure of in what direction they want to go.  They say the exit of PAS will weaken PR.  It will in the next election, but PR will grow stronger as a result.  Long term gains for short term pains.  It's high time PR consolidate and have clear aims.

Top reasons why volumes are so low in the market.

Just the other day, i was talking to a remiser in the local market.  It's really difficult out there as retailers have all but stepped away from trading.  People just leave the market alone and aren't really interested in buying shares these days.  Thus remisers get less brokerage and find it difficult to survive.

So I thought long and hard about the reasons.  It's a pity, but I think some of the reasons have more to do with evolution rather than regression.

Low volumes have been a phenomenon not just in Malaysia, but all around the world. Evolution of the markets is probably a big reason for this phenomenon.

1.  Low retail particpants.  I think this has a lot to do with the advent of online trading and electronic trading. .  Online trading bring price quotation much more quickly and faster than trading through the phone.

Faster price quotation leads investors to generally be more prone to gambling issues.  Thus investors are more prone to be burned out and lose confidence.

A trend toward addictive trading behaviour among Canadian retail investors emerged during the transition from the use of telephones to personal computers to manage stock transactions, says Robert Williams, a professor at the University of Lethbridge and co-editor of the Routledge International Handbook of Internet Gambling.

“The instantaneous nature of online trading makes it a problem for people who possess impulsive tendencies to begin with,” he says. “We have a fairly efficient stock market and few people are capable of exploiting its inefficiencies. Yet typical problem traders think of themselves as smarter than the average person and park their statistical common sense at the door.”

2.  Inefficient market  places  have shown to be the best areas for people to "beat the market".   It's no longer easy to make a quick buck as markets become more efficient.  Although it is still possible, it's definitely harder.  Thus, fewer opportunities for investors.

The Fidelity study found significant long-term outperformance by active managers in segments of the stock market — international and smaller companies — often thought to give them the best chance of beating passively managed rivals. That’s because those asset classes are deemed less efficient in transmitting information to investors and therefore better able to be exploited by superior research.

Applying those filters, active management won out. The average active fund that met the criteria beat its benchmark by 0.18 percentage points, while the average index tracker trailed by 0.03 percentage points. 

So lower volumes in the world wide share markets are probably a product of the gambling characteristics in the online trading world and harder to find investments overall due to the market becoming more efficient.

Bank Negara on 1MDB trail

From the Edge:

Bank Negara Malaysia (BNM) has started a “formal enquiry” on whether 1Malaysia Development Bhd (1MDB) and its officers had breached central bank rules and regulations.

In a statement yesterday, the central bank said the following developments will normally trigger a formal enquiry: 

•     When monies for which approvals are given are not used for the purpose indicated in the submission.

•     When incorrect or false information is provided in the submission.

•     Failure to comply with the conditions in the approval.

“With respect to 1MDB, a formal enquiry has commenced to examine any contravention of the central bank’s rules and legislation. This involves the issuance of a legal directive requiring information from the entity,” BNM said.

It is also taking statements from individuals involved in the governance process of 1MDB and obtaining information from other relevant domestic and foreign parties.

The legal directive requires information in accordance to the relevant Acts that the central bank administers.

This will require the board and management of 1MDB to provide the information within a specified time frame. Under the Financial Services Act 2013, failure to meet this request can result in a fine of up to RM50 million or up to 10 years in prison or both.

Since 2009, 1MDB has raised around US$7 billion (RM25 .76 billion) in foreign-denominated debts. It has also remitted billions overseas. These include:

•     US$1.83 billion for an aborted joint venture with PetroSaudi International Ltd (PSI) and subscription to Islamic murabaha notes by PSI.

•     Around RM4.25 billion deposited with Abu Dhabi’s Aabar Investments for co-guaranteeing a loan.

•     Parking overseas most of the US$3 billion raised for the development of the Tun Razak Exchange.

BNM said it had also forwarded information received from foreign authorities to local investigation agencies, which are probing other possible breaches after obtaining the permission from the foreign authorities, as  it has no power to investigate fraud, tax evasion, corruption, cheating and criminal breach of trust.

The 1MDB plot has thickened.  What is most unusual is that the enquiry has only started after Singapore has given bank Negara the necessary information on 1MDB Singapore's accounts.  Thus more than likely they have seen something which is quite disturbing.

Banks don't do investigations until they have ample evidence of something afoot.

Cabinet members better think twice about not resigning.

MOF meeting Fitch, sounds unproductive to me

From Bernama:

The Ministry of Finance is expected to meet representatives of Fitch Ratings Agency later today to convince them that Malaysia's economy is still sustainable and should be viewed positively, said Secretary General Tan Sri Irwan Serigar Abdullah.

He said the agency, which currently rates Malaysia A-, had implied a 50 per cent likelihood of a downgrade in the country's credit ratings.

"We hope with initiatives on fiscal consolidation and growth emphasis as well as the launch of our Eleventh Malaysia Plan that allocated a total of RM260 billion for development expenditure, it will give positive indicators to the rating agency," he said.

He said Malaysia's economic growth was still good last year, and in the first quarter of this year posted 5.6 per cent growth while external trade was also growing.

But despite concerns over the current balance of payments, it is still positive, he told reporters after officiating the Rice Bowl startup awards organised by New Entrepreneurs Foundation (NEF) in conjunction with the 1ASEAN Entrepreneur Summit (1AES).

Fitch has touched before on one of the key reasons for Malaysia being under review was the 1MDB situation.  Since then, 1MDB has revealed some of its accounts were a little messed up as its Singapore accounts had Assets instead of cash.  Is it an accounting problem or is this a communication problem?

Deutsche bank wanted early repayment, probably as a result of a covenant which liquidity was an issue as Singapore bank held assets instead of cash.  Maybe the MOF could have addressed something about 1MDB if they are serious about convincing Fitch.  But it looks like they weren't really that serious.

Finally someone being honest about MAS

From Reuters:

The newly appointed chief executive of loss-making Malaysia Airlines said on Monday the carrier is "technically bankrupt", underlining the case for a restructuring to cut a third of jobs, scrap some international routes and review its long-haul fleet.

"We are technically bankrupt...the decline of performance started long before the tragic events of 2014," Christoph Mueller said, speaking at a news conference. Already squeezed into years of losses by stiff regional competition, the carrier was seriously affected last year by two separate jet disasters.

Mueller was making his first public appearance as CEO since being hired last month by the carrier's owner, Malaysian state fund Khazanah, to lead the restructuring. Khazanah, previously the majority owner, took the airline private last year as part of a 6 billion Malaysian ringgit ($1.63 billion) plan aimed at returning it to profit within three years.

Unfortunately MAS business story has come to this.  It's previous business model was unsustainable and the air tragedies have just been unrelenting.

I guess the government has had enough and has bit the bullet by taking the hard approach and even enacting laws to help MAS to get competitive.  The job cuts will hit the Malaysian economy pretty hard.  Already CIMB is looking to undergo job cuts as well.

I already quoted previously that Airline tragedies likely doom the airlines it happens to.  Air Asia seems to be the only exception to the rule.  I don't know if it is their business model or branding but they seem to have been able to sustain well.  Good luck on restructuring MAS.

Loan growth lacking but doesn't say much about the economy

From the Edge:

KUALA LUMPUR: The domestic total loan growth in April decelerated to 8.78% year-on-year (y-o-y), as compared with 9.24% in March, as household and business lending slowed.

According to Bank Negara Malaysia’s monthly statistical bulletin in April, the loan application for the month was almost flat; it went up barely 0.7% y-o-y compared to a deceleration of 4% y-o-y in March.

Meanwhile, loan approval contracted by 2.4% compared to an increase of 1.7% a month before.

“On an annualised basis, loans grew 5% y-o-y, still lagging our 7% to 8% loans growth expectation,” Kenanga Research analyst Kelly Tan told The Edge Financial Daily when contacted. “Essentially, growth in repayments outpaced disbursements,” she said.

Loan growth is one of those indicators which tells more about the banking industry than the general GDP.  It doesn't say what those loans are good for.  It might not translate to spending, but it will generate revenue for banks.

Loan growth is a bit lagging in that it tells April loan numbers while we are already in June.  I consider it a non event mainly for the reason that we don't know if the loans will translate directly to GDP growth.  Add to that the actual percentage change was pretty insignificant.