PETALING JAYA: Hong Leong Investment Bank (HLIB) Research expects Malaysia’s glove sector to remain evenly balanced in the second half of financial year 2026 (2H26), as lingering structural oversupply continues to offset improving valuations and the possibility of temporary pricing support from geopolitical developments.
The research house maintained its “neutral” call on the sector and retained “hold” recommendations on Top Glove Corp Bhd
, Hartalega Holdings Bhd and Kossan Rubber Industries Bhd.
It said sentiment had swung sharply during 1H26 when glove makers initially outperformed the broader market, as investors anticipated stronger earnings following average selling price (ASP) increases that more than compensated for higher raw material costs.
Optimism was also fuelled by concerns over nitrile butadiene rubber supply after the temporary closure of the Strait of Hormuz during the Iran conflict.
However, those gains proved short-lived after the US-Iran peace agreement in mid-June led to the reopening of the Strait of Hormuz, bringing investor attention back to the industry’s long-standing oversupply problem.
Although the ceasefire has since effectively ended, HLIB Research believes supply-demand fundamentals will continue to dominate the sector’s outlook.
“The recent correction in glove share prices and lingering geopolitical uncertainty partly offset persistent oversupply risks, resulting in a balanced risk-reward profile,” it said in a report to clients yesterday.
HLIB Research identified China’s Intco Medical Technology as the key factor behind its cautious outlook.
It noted that Intco continued to expand production aggressively, while Malaysian glove manufacturers and Thailand’s Sri Trang Gloves remained disciplined, with most of their capital expenditure directed towards maintenance or efficiency improvements rather than substantial capacity additions.
Intco’s annual installed capacity rose to 103 billion pieces in 2025 from 87 billion pieces a year earlier.
“We believe Intco will continue to build new capacity in 2026 and beyond, with the strategy to deliberately keep industry-wide plant utilisation rate below the equilibrium threshold of 85%,” HLIB Research said.
The research house expects that strategy to keep industry utilisation below optimal levels, limiting glove pricing and making it harder for regional manufacturers to expand margins or regain pricing power.
It said Intco appears financially equipped to pursue this strategy, after remaining profitable despite operating in a lower-price environment over the past two years.
Industry data compiled by the research house pointed to the persistence of excess supply.
Global glove capacity is forecast to rise to 530 billion pieces in 2026 and 555 billion pieces in 2027, while demand is expected to reach only 373 billion and 388 billion pieces, respectively.
That leaves global utilisation at approximately 70% for both years, well below the industry’s estimated equilibrium level of 85%.
China’s production capacity is projected to continue expanding, whereas Malaysia’s installed capacity is expected to remain largely unchanged.
HLIB Research, nevertheless, sees scope for intermittent improvements in sentiment, should geopolitical tensions disrupt supply chains again.
“In our view, the fragility of the Strait of Hormuz reopening could once again act as a tailwind for ASP adjustments, temporarily eclipsing structural oversupply concerns,” it noted.
Even so, the research house believes such support would likely prove temporary, with structural oversupply remaining the dominant theme for the global glove industry over the medium term.
Another glove sector analyst from a foreign research house said he is cautiously constructive for the next 12 to 18 months on the industry, “but not bullish”.
He anticipates Malaysian glove makers to deliver gradually improving earnings from current depressed levels as utilisation rates recover, cost structures remain lean, and balance sheets stay strong.
“We personally do not think another severe price war is the most likely outcome,” added the analyst.
“Several years of industry rationalisation have removed weaker capacity, major Malaysian producers have become much more disciplined on expansion, and demand for medical gloves should continue to grow steadily with ageing populations, higher healthcare spending, and broader healthcare access across emerging markets.”
“That combination should allow selling prices to stabilise and margins to normalise modestly from trough levels, even if they remain well below pandemic-era peaks,” he said.
He added that Malaysian manufacturers are better positioned than in previous cycles to counter the China-led capacity expansion, because the former retained advantages in product quality, regulatory compliance, customer relationships, automation, and financial resilience.
“Overall, we would characterise the sector as a selective recovery story rather than a broad re-rating opportunity.
“Earnings should improve, dividends should become more sustainable, but investors are likely to be rewarded through stock selection rather than a strong sector-wide rally.”
