Glove giants sink to multi-year lows

KUALA LUMPUR: Shares of Malaysia's glove giants tumbled to multi-year lows on Wednesday, dragged down by disappointing earnings, persistent concerns over a global supply glut and looming United States import tariffs.

Often referred to as the "Big Four", Top Glove Corp Bhd, Hartalega Holdings Bhd, Supermax Corp Bhd and Kossan Rubber Industries Bhd were among the most actively traded counters on Bursa Malaysia throughout the session.

Top Glove closed two sen or 3.1 per cent lower at 61.5 sen — its lowest level in 34 months — with over 46 million shares changing hands. The stock has slumped 54 per cent year-to-date from RM1.35 on Jan 2.

Notably, Hartalega fell to its lowest level in more than a decade since April 2013, following a disappointing quarterly results that missed market expectations.

Hartalega closed at RM1.24, down eight sen or 6.1 per cent, valuing the company at RM4.7 billion. A total of 25 million shares changed hands. The stock has dropped 68.8 per cent so far this year from RM3.97 in January.

Supermax slid 2.5 sen or 4.7 per cent to 51.5 sen, hitting a five-year low on volume of over 12.8 million shares. Year-to-date, the stock has shed more than half of its value.

Kossan dropped four sen or 3.1 per cent to RM1.23, its lowest level in two years, with 10 million shares changing hands. The counter has plunged nearly 56 per cent year-to-date.

Tradeview Capital portfolio manager Ng Tzyy Loon said that with the glove sector currently in a down cycle, market sentiment plays a significant role in driving share price movements.

He said many investors were hoping to see more positive developments but what they received were more negative news from Hartalega's management.

"Though Harta did mention that the restocking of gloves could help support future sales, the company remains cautious about supply spillover from Chinese manufacturers.

"And we all know that the Chinese manufacturers can be aggressive when it comes to dumping stock at price that are marginally above – if not below – their cost just to survive," he told Business Times.

Ng added that the 19 oer cent US tariff places immediate competitive pressure on Malaysia's pricing advantage, with companies heavily exposed to the US market facing the greatest earnings risk.

"Of course, to fully assess this impact, we need to consider the price elasticity of demand for gloves.

"However, when we examine the gloves we export to the US – which are primarily medical gloves – they represent less than one per cent of total US medical expenditures.

"Therefore, we believe demand should not decline substantially," he added.

Despite their depressed share prices, Ng said the Big Four glovemakers are still trading at forward price-to-earnings (P/E) ratios of no less than 30 times, a level considered stretched by many market watchers.

"While a stock can trade at a high P/E ratio just before fundamental or sectoral cycle improvement kicks in, we don't see this happening in the near future.

"Investors joining the fray must be fully aware of the risks they are taking," he said.

Meanwhile, Malacca Securities Bhd research head Loui Low said the average selling prices (ASPs) in the glove industry have largely stabilised and are unlikely to recover meaningfully in the near term.

"The risk now is that things are becoming commoditised. ASPs can't go higher and may continue to stabilise around current levels for now," he said.

Low also noted that the 19 per cent US tariff on Malaysian gloves could further dampen investor sentiment, although the overall impact remains uncertain.

"But no one knows what tariffs China will eventually face. If China also gets hit with a 19 per cent tariff, then it's possible the playing field would remain level and we might not see a significant shift in orders back to Malaysia," he said.

TA Securities analyst Tan Kong Jin said Malaysia's estimated market share of medical gloves in the US has increased to about 60 per cent in the first half of this year from 44. per cent in December 2024.

He said the higher market share was driven by the US tariffs on Chinese-made medical gloves from 7.5 per cent to 50 per cent in January 2025 and is currently at 80 per cent.

He noted that Hartalega's exposure to the US market is the highest at 57 per cent, followed by Kossan (52 per cent), Supermax (28 per cent) and Top Glove (26 per cent).

"We are mildly negative on the latest tariff updates as Malaysia's pricing advantage has reduced significantly against other neighbouring Southeast Asian countries.

"Currently, Thailand, Indonesia and Cambodia match Malaysia rate at 19 per cent, while Vietnam is subject to a 20 per cent duty," he said in a note.

On the flip side, Tan said Malaysia's market share is expected to remain at 60 per cent in 2025 as the tariff rates for competing nations are very similar.

However, he said customers are likely continue to push back in terms of cost sharing as oversupply remains.

"Currently, Malaysia companies' utilisation rates are still well below the optimum levels. For instance, Hartalega is running at 69 per cent while Top Glove is at 61 per cent, based on the lastest quarterly numbers.

"Besides that, big China glove manufacturers like Intco and BlueSail will continue to expand into Vietnam, Indonesia and Cambodia, which will result in a higher supply.

"We note that Intco's Vietnam pricing is expected to be at least 15 per centhigher than their Chinese manufacturing plants," he added.

TA Securities kept its "Underweight" stance on the glove sector as the global oversupply is expected to persist for at least the next three years amid increasing competition from Thailand, Indonesia and Vietnam.

Tan said the margins for the glove industry would not revert to prepandemic for the foreseeable future.

Furthermore, Malaysian glove players are likely to continue losing market share in the non-US markets to the Chinese manufacturers.

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