By Chester Tay
Malaysia glove stocks are rebounding as traders are drawn by low valuations and the price war between top manufacturers eases thanks to capacity restrictions and an energy crunch in China, where much of the newly built-up production is based.
Shares of the world's largest glove maker, Top Glove Corp. Bhd., are clawing back some ground after hitting a 52-week low on Dec. 14. The stock was up 6.4% at MYR2.33 in midmorning trade on Monday.
Other glove stocks are rising as well, with Hartalega Holdings Bhd. gaining 2.2%, Kossan Rubber Industries Bhd. adding 4.5% and Supermax Corp. Bhd. up by 4.2%.
Glove stocks have been sliding this year as the pandemic improves and restrictions are eased, clouding the glove demand outlook.
Bursa Malaysia Healthcare Index, which includes glove stocks along with other healthcare players like pharmaceutical companies and hospital operators, has fallen 37% in the year to date.
Though value has emerged for certain glove stocks, RHB Research thinks the balance of risks remains tilted to the downside, and doesn't expect a re-rating of the sector any time soon.
"Demand remains soft as [glove] buyers continue to practice making minimal purchases to prevent sitting on high-cost inventory," RHB said.
The emergence of the Omicron variant could boost sales, but glove prices aren't likely to surge the way they did in 2020 because vaccination rates are up, policymakers are more prepared and major glove manufacturers have expanded capacity significantly, the brokerage said.
"We believe companies that expanded the most throughout the pandemic are at a greater risk of recording poor utilization rates going forward," RHB said.
Write to Chester Tay at email@example.com
(END) Dow Jones Newswires
December 26, 2021 22:37 ET (03:37 GMT)Copyright (c) 2021 Dow Jones & Company, Inc.