SINGAPORE — Tariff increases on Chinese products unveiled last week by the U.S. have produced an unexpected winner in the stock market: Malaysia’s rubber glove makers.
A worker inspects products at a Top Glove factory in Malaysia: Analysts predict higher U.S. tariffs on Chinese surgical gloves will translate to higher profits for Malaysian competitors. © Reuters
Shares of Top Glove, a big rubber glove maker in Malaysia, hit their highest point in nearly two years last week, jumping 30% on Wednesday alone. Local peers Hartalega Holdings and Kossan Rubber Industries also surged, as did Thai competitor Sri Trang Glove.
The tariff increases come ahead of November’s presidential election in the U.S., as president Joe Biden takes a hard line against China. Higher duties on Chinese electric vehicles, which will rise from 25% to 100%, and on semiconductors, drew attention worldwide.
For investors in the Malaysian stock market, the focus was on the tariffs imposed on rubber gloves for medical and surgical use, which will rise from 7.5% to 25% in 2026.
The scenario of a hike in tariffs to 25% on Chinese gloves is “set to solidify the Malaysian glove industry’s market leader position, and allay earlier concerns [about] market share losses to China producers due to stiff competition,” UOB Kay Hian Analyst Jack Goh said in a report.
Malaysia is a major producer of natural rubber. With a large number of relatively low-cost migrant workers, the country is home to many of the world’s largest medical glove makers. The U.S. is a key market, with North America accounting for 50% Hartalega’s revenue last year, according to the company’s annual report.
Malaysian glove makers rallied during the COVID-19 pandemic, as demand for their products rose around the world. But with the pandemic ceasing, demand has shrunk, dealing a blow to producers like Top Glove.
Malaysian glove makers have also recently faced severe price competition from Chinese peers, including Intco, Blue Sail Medical and Zhonghong Pulin. Goh estimates the global market share of Chinese companies rose from about 7% in 2019 to 32% in 2023.
UOB Kay Hian calculates that Chinese manufacturers’ average sales price per 1,000 units is currently $17, and that the new tariffs will lift prices to $19 to 20 in the U.S., reducing the price gap with Malaysian products.
Top Glove’s net loss for the December to February quarter was 51 million ringgit ($10.8 million), narrowing from a loss of 164 million ringgit a year earlier. The improved competitive landscape will “allow [Malaysian glove makers’] profitability and margin to surpass pre-pandemic’s level in 2026,” said the UOB Kay Hian report.
Malaysia’s Maybank Investment Bank has raised its rating on Top Glove shares from Sell to Buy, and its price target to 1.21 ringgit per share from 0.80 ringgit. Likewise, it raised the target price for Hartalega Holdings from 3.02 ringgit to 4.36 ringgit.
“We expect this latest development to narrow the price gap between Chinese and Malaysian-made gloves, making Malaysia gloves more attractive in the U.S. market,” Maybank said in a recent report.
With the higher U.S. tariffs, Chinese glove producers will explore other markets, triggering new competition with Malaysian companies.
But Maybank pointed out that Malaysian manufacturers can still compete. “While there is a risk that Chinese glove makers may shift their focus to the European markets, we believe Malaysia glove makers will be able to compete, especially after a few rounds of cost rationalization and decommission exercises over the last two years that have led to better cost efficiency,” it said.
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