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KUALA LUMPUR (September 13): While the economy has experienced a sharp slowdown due to the COVID-19 pandemic, the glove industry has bucked the trend and exceeded market expectations.
Malaysia, which holds 65 percent of the global glove market share, has seen local publicly listed companies enjoy an exponential rise in share prices due to increased demand.
From March to mid-August, seven Malaysian companies, namely Top Glove, Hartalega, Supermax, Kossan Rubber, Careplus Group, Rubberex and Comfort Gloves, have invested RM80 billion in the stock market.
Top Glove and Hartalega were among the top 30 companies listed on the FTSE Bursa Malaysia KLCI by market capitalization, which have seen their price-to-earnings (PE) ratio skyrocket to more than 75% throughout the period.
As for the other companies, the increase in shares was led by Supermax, which increased more than 1,000 percent in duration.
The sharp increase in the PE ratio of each stock was indicative of an overbought position.
To reduce the impact of declining value and increase affordability for investors, companies often conduct stock split exercises.
However, after Top Glove and Supermax carried out the stock split, momentum shifted to pharmaceutical stocks driven by vaccine optimism, as well as stock repositioning primarily by retail investors.
This caused related stocks to experience a sharp decline from last week due to weak buying sentiment, prompting these companies to carry out share buybacks to boost investor sentiment and increase their equity stake.
It also raised questions about whether the glove counters bull has slowed.
Strong recovery after nine days of intense liquidation
For the past two weeks, glove counters have been under intense selling pressure driven by two main reasons.
According to a stock analyst, the main reasons were to cash in on the exponential gain, as well as to reposition other stocks, especially pharmaceutical and technology.
“After nine working days, the tables have turned again in favor of glove counters following the suspension of the UK-based AstraZeneca vaccine trial due to complications and the continued rise in COVID-19 cases across the world, ”said the analyst.
While the world hopes a COVID-19 vaccine will be produced soon, he said pharmaceutical companies that have been in the race to introduce one are experiencing setbacks.
On a two-week basis, the healthcare index comprising glove makers, pharmaceuticals and hospital players saw a 25.17 percent drop before posting a 9.15 percent rebound on Friday (Sept. 11). ).
At the end of the week, rubber glove stocks dominated the highest-earning segment, while being the leading index, the FBM KLCI finished on a stronger note driven by strong performance from Top Glove and Hartalega.
Vincent Low, research vice president at Rakuten Trade Sdn Bhd, said the move was spurred by bargain hunting at glove counters after recent sell-offs.
“Glove counters have been oversold for the past week. In the coming week, we expect glove demand to be on the rise, indicating a healthy correction,” he said.
Bullish trend still on the charts
In terms of market capitalization, Top Glove stands at RM 62.97 billion, Hartalega (RM 42.64 billion), Supermax (RM 19.33 billion), Kossan Rubber (RM 13.66 billion) RM), Comfort Glove (RM 2.14 billion), Rubberex (RM1.46 billion) and Careplus (RM1.36 billion).
Despite the latest slippage due to recent liquidations, research houses remain optimistic about the future performance of glove companies, as COVID-19 cases have yet to show signs of slowing down.
With health operating procedures in place, as well as growing concern for another wave as the winter season approaches, steady demand and positive financial results indicate stability for the sector.
“While retail investors often follow the trend, whether buying or selling, we believe glove companies are an asset to invest in as the pandemic will create a new norm, leaving glove demand on a stable note. “said one equity analyst. .
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