Malaysian glove stocks outperformed, with three of the sector’s top four producers surging over 10% in a highly active trading session on Monday.
Investors are betting on stronger earnings, supported by higher average selling prices, improving supply-demand dynamics and concerns that hantavirus outbreaks could lift glove demand.
Top Glove Corp Bhd (KL:TOPGLOV) climbed 13% and was the most actively traded stock on Bursa Malaysia. Hartalega Holdings Bhd (KL:HARTA) and Supermax Corp Bhd (KL:SUPERMX) added 11% each while Kossan Rubber Industries Bhd (KL:KOSSAN) advanced 7%.
Except for Supermax, the other three glove makers broke above their respective 200-day moving averages, signalling a potential shift in long-term sentiment towards the sector.
Glove manufacturers are entering a more favourable operating environment as supply pressures intensified and sentiment towards demand improved, said Malacca Securities head of research Loui Low.
“The supply side is quietly tightening, while demand fears are returning,” he said, noting that investors are beginning to price in tighter supply following chemical shortages and the shutdown of WRP Asia Pacific that eliminated 11 billion pieces of capacity.
Concerns over hantavirus mirrored trading patterns seen during the early stages of the Covid-19 pandemic while latest quarterly earnings from glove makers had also improved, Low said.
“Restocking and order pull-forwards tend to precede the actual earnings uplift. Glove names move before the numbers do,” he added.
Top Glove is currently trading at 45 times its forward earnings followed by Hartalega at 30.2 times and Kossan at 21.8 times, based on Bloomberg consensus estimates. Analysts expect Supermax to remain loss-making over the next 12 months.
Source: theedgemalaysia