Glove counters see heavy profit-taking

Downtrend: Rubber glove stocks tumble after cap on collateral value.

PETALING JAYA: Rubber glove counters saw big falls following the decision by brokers to put a cap on how much traders can borrow from the bank if they wish to use glove counters as collateral.

StarBiz reported yesterday that major brokerage houses became uneasy after the stratospheric rise in the share prices of glove companies and limited its collateral value to be based on a discounted value rather than the current market value of the shares.

All rubber glove counters experienced sharp declines yesterday, led by Hartalega Holdings Bhd, which is the biggest nitrile glove maker on Bursa Malaysia and it was the top loser on the bourse.

Hartalega fell RM1.52 to RM11.22 at its close. Top Glove Corp Bhd, the biggest rubber glove manufacturer in the world which fell to a day low of RM10.58, lost 10 sen by the end of the day to RM14.70 while Kossan Rubber Industries Bhd declined 40 sen to RM8.40.

Comfort Gloves Bhd lost 78 sen to RM2.97, Rubberex Corp (M) Bhd gave up 87 sen to RM2.93 while Supermax Corp Bhd declined 47 sen to RM7.14.

Adventa hit limit-down in the morning trade session when it fell to a day low of RM1.38 (-29.9%) about two hours into the trading session.

It eventually closed 49 sen lower to RM1.48 by the end of the trading day.

The same counter hit its limit-up last Friday when it surged 40 sen then to RM1.76 at its close.

The selldown in rubber glove stocks saw a crescendo sometime during the mid-morning session yesterday and some recovered lost ground in the afternoon session.

Despite their falls, these counters had seen some recovery in the afternoon sessions, as buyers bought as broader market conditions remained firm.

Analysts are still positive on these counters with UOB Kay Hian Research (UOB KH) saying demand is said to have grown by 30%-50% from the previous year.

It noted that the Malaysian Rubber Glove Manufacturers Association has projected for demand to grow by 20%, noting that demand will be supply capped.

“We also believe elevated demand could well sustain average selling prices up till the second quarter of this year to the fourth quarter of 2021, underpinning our 2021 earnings outlook, ” it said.

UOB KH said its overweight stance is based on the multi-fold valuation gains that have yet to fully factor in the impending earnings surge over the quarters ahead and the sustained glove demand until 2021, including the scarcity of safe-haven earnings growth as most other sectors face a multitude of headwinds.

UOB KH’s top pick for the sector is Top Glove with a target price of RM17.50.

AmBank Research in its report also maintained its overweight call on the industry as it believed selling prices would continue to soar for the next 12 months even as lead times for orders stretches up to 12 months.

“The glove companies’ earnings will be further pushed by expanded margins as raw material prices remain low, selling prices continue to grow, the continued weakening of the ringgit and expansion plans remaining intact for glove producers, ” AmBank Research said.

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Decline , glove , counters , profit taking , Hartalega , Top Glove ,


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