KUALA LUMPUR: CIMB Securities Research expects robust demand for Malaysian gloves due to the increase in US tariffs on gloves imported from China, beginning in 2025, which is likely to have a positive effect on the sector.
The firm believes that glove manufacturers will be able to raise their average selling prices (ASPs) to absorb the higher costs.
"On the positive side, we believe that improved supply-demand dynamics for Malaysian glove makers, driven by higher US tariffs on gloves imported from China, will help maintain demand despite the ASP increases," it said in a note.
Meanwhile, CIMB Securities said while pricing competition in non-US markets will be heightened, the firm believes that the situation remains a net positive as the US is the largest glove importer globally, with a 40 per cent share of global glove volumes.
"While China glove makers have opted to diversify its production base outside China (in Southeast Asia) to capture US demand, we expect any new capacity of China glove makers outside China to be smaller and less cost competitive," it said.
Moving forward, CIMB Securities reiterates its positive view on the glove sector, despite our view that measures announced in the 2025 Budget are negative for the sector.
Pending further clarification on the budget measures and company responses, the firm is keeping its earnings forecasts intact.
"Overall, we maintain our Overweight call on the rubber glove sector as we view Malaysian glove manufacturers as key beneficiaries of the U.S. tariff hike on gloves imported from China," it added.