KUALA LUMPUR: Shares of Malaysian glove manufacturers surged on Wednesday following the United States' decision to raise tariffs on Chinese rubber medical and surgical gloves to 25 per cent from 7.5 per cent.
Rakuten Trade Sdn Bhd equity research vice-president Thong Pak Leng said the new tariff is definitely positive for Malaysian glove companies as it gains competition advantage due to the narrowed price gap.
"However, the oversupply issue still persists. Therefore we believe the rally is not sustainable. On a positive note, the oversupply issue may come to an end by the end of 2024 or early 2025, and we may see improving earnings of glove companies after this," Thong told Business Times today.
Throughout the morning session, the heavy turnover seen in the trading stock of glove manufacturers put them among Bursa Malaysia's most active counters.
Top Glove Corporation Bhd, the world's largest glove maker, saw its shares rise as much as 29 per cent in early trading, the highest since May 2023.
Charting the highest traded volume on Bursa Malaysia, Top Glove was the most active counter, rising 25 sen or 26.04 per cent to RM1.21 at noon break on the back of 369.08 million shares done.
Supermax Corp Bhd rose 16.5 sen to RM1.03 on 210.47 million shares changing hands, while Careplus Group Bhd rounded out the top three, gaining seven sen to 27.5 sen on 178.33 million shares.
Hartalega Holdings Bhd jumped to a high of RM3.82, the highest since June 2022, while Kossan Rubber Industries Bhd jumped to a three-month high of RM2.83.
Tradeview Capital Sdn Bhd vice president Tan Cheng Wen said the new tariff is a major catalyst for the Malaysian glove counters and this has played a role in turning around the overall sentiment.
With the new import tariffs on Chinese medical gloves players, Tan said local players especially Hartalega and Top Glove (which derive 50 per cent and 17 per cent of revenue geographically from the US) will be more equipped to compete and potentially grow their revenue after exhausting the cost optimisation route of decommissioning inefficient plants.
"The continuation of this performance will also be dependent on the upcoming quarterly results around the end of this month and the potential boost in orders due to US tariff hikes on Chinese players is only expected to kick in sometime in the second half of next year," he said.
The current average selling price (ASP) gap between Malaysian and Chinese glove makers is US$1-US$2 per 1,000 pieces, with the blended ASP for Malaysian glove makers at US$19 per 1,000 pieces.
MIDF Research expects that the higher imposition of import tariffs on Chinese medical gloves will increase the cost per 1,000 pieces.
Consequently, the firm said Chinese glove makers are likely to pass these costs onto customers through price adjustments.
"This could potentially narrow the ASP gap or result in Chinese glove makers charging higher ASPs compared to Malaysian/Thai counterparts.
"Given the ample production capacity among existing players, we view that US medical glove importers are likely to shift their sourcing from Chinese to other glove makers before the tariff imposition in 2026," it said in a note.
MIDF Research remains cautious as intense competition is expected to continue exerting upward pressure on pricing for all glove makers within our coverage.
"On the positive side, the replenishment of inventory following the expiration of pandemic stockpiles is anticipated to bolster glove demand and improve sales. The recent permanent and temporary closures of some production facilities could enhance production efficiency and decrease production costs per unit," it added.