Prospect of gaining from US tariff hike on Chinese peers spurs rally among Bursa’s Big Four glovemakers

GLOVE stock pundits must be rejoicing as all the Big Four glovemakers rallied today’ (May 15), led by Hartalega Holdings Bhd which jumped 78 sen or 26.35% to close at RM3.74 at the mid-day trading break to emerge the day’s top gainer with 56.5 million shares traded – a rather hefty volume unseen for quite a while.

The glove stock craze is likely sparked by the latest US trade retaliation on Chinese rubber medical and surgical gloves whereby the tariffs will be hiked to 25% in 2026 (from 7.5% currently).

Such development has prompted Maybank IB Research to retain its “buy” call on Hartalega with a higher target price (TP) of RM4.36 (from RM3.02) while Top Glove Corp Bhd gets upgraded to “buy (from “sell”) with a new TP of RM1.21 (from 80 sen) and Kossan Rubber Industries Bhd was re-rated to “buy” (from “hold”) with a TP of RM2.70 (from RM2.08).

“This higher tariff is expected to close the price gap between Malaysia and Chinese gloves, thus making Malaysia gloves more price attractive in the US (a key export market),” projected analyst Wong Wei Sum in a Malaysian glove sector update. “Our order of preference are Hartalega, Top Glove and Kossan.”

Source: Maybank IB Research

Kossan came in second on the top gainers’ list behind Hartalega with the counter having spiked 41 sen or 17.23% to RM2.73 with 35.51 million shares traded.

Elsewhere, Top Glove Corp Bhd – the world’s largest glovemaker – is the most active stock thus far after having edged up 25 sen or 26.04% to RM1.,21 with 369.08 million shares exchanged hands, followed by Supermax Corp Bhd on the second spot with 210.47 million shares. The smallest among the Big Four glovemakers surged 16.5 sen or 19.08% to RM1.03.

According to Maybank IB Research, the US is hiking tariffs on a wide range of Chinese imports from semiconductors, batteries, solar cells and critical minerals to medical products including rubber medical and surgical gloves.

The research house which reiterated its “positive” stance on the glove sector further noted that Malaysian glove makers have been losing market share to their Chinese counterparts since 2021 due to intense price war.

“While there is a risk that Chinese glove makers may shift their focus to the European markets (Top Glove: 35% of sales, Hartalega: 25%), we believe Malaysian glove makers will be able to compete, especially after a few rounds of cost rationalisation and decommission exercises over the last two years that have led to better cost efficiency.” – May 15, 2024

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