According to Morgan Stanley, the surge in bank credit growth in Asia ex-China is attributed to several key factors. A significant increase in capital expenditure, particularly in sectors such as artificial intelligence, energy, defense, and industrial supply chains, is driving this growth.
The report highlights that producer price index (PPI) inflation has reached a 3.5-year high of 4.3%, which is increasing the demand for working capital across various industries. As real economic activity picks up, the inflationary pressures are further boosting the need for loans, particularly for working capital among businesses and end users.
Additionally, there is a noticeable rise in consumer credit demand, supported by improved job creation and retail sales growth in the region. Despite household loan growth remaining within historical norms, it is trending upwards, reflecting a positive shift in consumer spending.
Morgan Stanley emphasizes that bank credit continues to be the primary source of macro funding in Asia, as the corporate bond and private credit markets are still developing