PETALING JAYA: Despite long-term global glove demand growth staying positive, structural supply pressures remain the main concern for the glove sector.
Hong Leong Investment Bank (HLIB) Research said the ringgit’s strength adds to headwinds for the sector.
It poses near-term earnings risks via two channels which are unfavourable revenue translation and compressing margins, as well as more cautious ordering by glove distributors, as reflected by the 29.2% month-on-month decline in Malaysian glove exports in November.
An analyst who tracks the glove sector concurred, stating that a strong ringgit will have an impact on glove exports.
“We need to keep an eye on the ringgit, and may make further adjustments if there is a continuous uptrend in the local unit,” he told StarBiz.
Meanwhile, HLIB Research said sustained share price corrections in 2025 have already factored in the near and long-term challenges, supporting its “neutral” stance on the sector.
“Oversupply risks continue to weigh on investor’s positioning in the sector.”
UOB Kay Hian in its report said for the first half of financial year 2026, it assessed that the glove sector’s volume sales may see a 5% to 10% quarter-on-quarter growth, lifted by normalised the US replenishment cycle.
This may be largely offset by a weakening ringgit versus US dollar rate (4.05 to 4.10) which resulted in top-line compression.
More importantly, the sector’s profitability and margin will also continue to be suppressed by intense competition in the European market, alongside additional capacity from China’s worsening oversupply dynamics, it added.
The research house also said the sector is now trading at minus 0.25 standard deviation below mean valuation on its 2026 earnings forecasts.
With the permanent disruption caused by the influx of China players’ capacity and their aggressive push to gain market share continuing to weigh on investors’ sentiment, we opine that sector’s valuations will eventually undergo a structural de-rating, it said.
It added that the sector’s risk-reward also appears neutral, with the glove companies under our coverage posing only moderate capital upside opportunities based on 2026’s normalised earnings.
