KUALA LUMPUR, March 25 (Bernama) — Rubber glove stocks were heavily traded Tuesday morning, marking gains on Bursa Malaysia amid a better second half outlook from a research firm.
Kenanga Research said it expects stocks of companies like Top Glove, Supermax, Kossan and Hartalega to “outperform” again in subsequent quarters after having performed poorly recently.
It said the optimism was based on its analysis that the slower-than-expected new capacity expansion should keep supply and demand in equilibrium and ultimately dispel market skepticism of an oversupply situation.
“We expect earnings growth to resume in subsequent quarters, underpinned by new capacity expansion fuelled by sustained demand for rubber gloves, led by latex gloves although nitrile gloves, which have been consistently taking up the former’s market share, will continue to show better growth prospects.
“It would also be due to the weakening of the ringgit against the US dollar, which is positive news for rubber glove players, and the sustained low raw material prices,” Kenanga Research said in a note.
It added there should be no worries about potential high energy costs going forward as the recent electricity tariff hike is only expected to hit rubber glove players’ earnings by between two and three per cent.
“We are not overly concerned since rubber glove players have been able to pass on the cost increase judging by past experience during electricity and natural gas tariff hikes,” it said.
Kenanga Research has maintained its “overweight” recommendation on the rubber gloves sector with Supermax as ‘top pick’ stock.
Among rubber glove stocks, both Supermax and Top Glove rose five sen each to RM2.52 and RM4.93 respectively, Kossan gained four sen to RM4.00, and Hartalega added one sen to RM6.44, as at 10.32 am.