Bloodbath for Big Four glove makers doesn’t come as a surprise

THE writing has been on the wall since the day prices of glove stocks shot through the roof. The common sense sustainability factor has been brushed aside with the notion of long-lasting bullish prospect that can stretch till 2025.

But with two days before we bid farewell to a tumultuous year, listed glove makers suddenly found themselves inflicted with a wave of misfortune that no window dressing activity is able to rescue them.

So how did a lucrative industry that only nine months ago made billionaires of company founders suddenly loses its glitter even when gloves are still deemed a crucial personal protective equipment (PPE) in the face of the COVID-19 pandemic that is raging across the globe with a spike in daily infection rate?

The immediate answer is obviously a shift of focus to vaccine as the lasting cure for the pandemic.

But beyond that, many investors have forgotten that both robust demand for gloves and their high average selling prices (ASPs) have already been factored into the current stock price of most, if not all, existing glove stocks.

As such, this leaves very little room for glove stocks to resume an upward momentum that they used to enjoy some six to nine months ago.

Yet, another point of contention that many Malaysian investors failed to capture on their radar is the disconnect between the labour-intensive glove industry and the ESG (environment, social & corporate governance) criteria that is increasingly becoming a benchmark of socially responsible investing by many institutional and fund managers.

The slightest mistreatment and deprivation of workers’ welfare is deemed an ESG breach which is punishable by stock dumping, to bluntly put it.

With the rampant surge in the number of COVID-19 cases associated with glove makers – not to mention the disregard for liveable accommodation and humane treatment of their workforce – it can be assumed that many foreign funds and even local institutional investors have begun to desert glove counters.

Of late, there is a trend of the Employees Provident Fund (EPF) off-loading its stockholding in Top Glove Corp Bhd, the world’s largest glove maker.

Suffice to say that between Nov 26 and Dec 24 alone, the retirement fund has reduced its stake in Top Glove from 6.03% or 484.82 million shares to 5.11% or 409.93 million shares. This means that EPF is a mere 0.11% away from relinquishing its position as a substantial shareholder of the company.

More worrying is that the current share disposal trend of EPF in Top Glove bears semblance to that in AirAsia Bhd when the budget carrier was embroiled in graft allegation early this year.

All-in, Hartalega Holdings Bhd was the biggest loser among the Big Four glove makers today, shedding 52 sen or 4.17% to RM11.94 with 5.3 million shares traded, thus valuing the company at RM40.93 bil.

This was followed by Supermax Corp Bhd which retreated 33 sen or 5.16% to RM6.06; Top Glove which edged down 25 sen or 3.99% to RM6.01 and Kossan Rubber Industries Bhd which declined 10 sen or 2.08% to RM4.70. – Dec 29, 2020

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