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PETALING JAYA: Rubber glove counters that have been moving forward, with no signs of the Covid-19 pandemic abating, suddenly found themselves in a bloodbath amidst various developments involving the sector.
Some positive news about a vaccine, competition increasing faster than expected and concerns of a possible windfall tax, all attributed to the correction, analysts and market watchers said.
None of the glove makers, not even newcomer Mah Sing Group Bhd
, managed to survive the massive pushback that saw a red sea throughout the trading day.
Heavy weights Top Glove Corp Bhd and Hartalega Holdings Bhd it fell, causing the FBM KLCI to drop which lost 18.57 points or 1.23% to 1,492.40 points.
Top Glove lost 60 sen or 6.33% to $ 8.88 while Hartalega fell $ 1.20 or 6.30% to end at $ 17.84.
Kossan Rubber Industries Bhd it slid further in percentage terms, up to 9.96% or 81 sen at RM7.32. Supermax Corp Bhd it lost 86 sen or 8.3% at RM9.50.
Aside from the “Big Four”, other players like Comfort Gloves Bhd it also fell 41 sen to RM4.47 while Ruberrex Corp (M) Bhd lost 20 sen to RM2.64.
A total of 554.57 million rubber glove-related shares were traded yesterday, including Mah Sing’s, representing 6.54% of the total trading volume of 8.48 billion.
An analyst said the drop in rubber glove stocks was due to profit-taking activities ahead of the earnings season again, along with positive news about a Covid-19 vaccine.
Hartalega is expected to announce its results next Tuesday, while Supermax will do so sometime next week.
Kossan’s results are expected in the second or third week of next month, while Top Glove may announce it in the second or third week of December.
On the possible implementation of the windfall tax, analysts believe that it would still be impossible.
“I don’t think the talk is resurfacing. It’s always been there, but it’s more about how it will be implemented.
“I still think it is unlikely to happen,” the analyst said.
A healthcare analyst emphasized that rubber glove companies were already paying corporate taxes, which would have been higher than normal given their soaring profits.
“If there is going to be a windfall tax, how much? Because that will ultimately affect your earnings.
“Of course, the higher it is, the worse it is,” he said, adding that if rubber glove manufacturers are to receive a windfall tax, it must be done very carefully in terms of how it will be structured and how it might affect other sectors.
The analyst said they have yet to hear any formal talk about the windfall tax but, from what was deduced from previous engagements with the companies, it was not likely to happen. “Doing so will cast a negative light on our foreign direct investment (FDI).
Gloves are not the only businesses doing well this year.
“The coaches are also enjoying a good run.
“Does that mean that other high-performing companies will also have to pay windfall taxes?” I ask.
MIDF Research said in a report that glove makers are likely to break their own all-time records set in the last quarter in the next two quarters.
He said glove ASPs were still on an upward trajectory after the jump seen earlier this year, while supply remained tight.
“Ex-factory prices are expected to grow between 30% and 40% in the third quarter of this year compared to the last quarter. After that, there may be another 40% to 50% increase in Q4, ”he said, adding that ASPs are likely to remain high in FY21 based on a base case scenario of vaccine availability in mid-September. 2021 as the administration of vaccines. it would also require the use of gloves.
The research house also said that Supermax and Kossan are likely to be included in the FBM KLCI in the upcoming December review and this would increase the weight of glove counters in the benchmark index to 40% from the current 15%. Supermax and Kossan remained 16th and 23rd respectively in terms of market capitalization at yesterday’s close.
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