KUALA LUMPUR, April 5 (Bernama) — The strengthening of the US dollar globally is likely to boost the rubber glove industry as exports of the commodity are denominated in the greenback, said JF Apex Securities Bhd.
“The strengthening of the US dollar would increase the realised earnings of all the rubber glove manufacturers as they export most of their products abroad to key areas such as North America, Latin America and Europe,” it said in a note today.
The safe-haven currency appreciated to an average of RM3.11 against the greenback in March 2013, up 2.3 per cent from the average of RM3.04 per US dollar in January 2013.
The research house also noted the new strain of bird flu, known as H7N9 that has killed six people in China, will also benefit the rubber glove industry if the disease unfortunately spirals out of control.
“The outbreak of the major infectious disease would trigger a substantial demand for healthcare services and thus the demand for rubber gloves,” JF Apex said.
It said Top Glove Corporation Bhd, with annual production capacity of 40 billion pieces of gloves, would be the best proxy in the sector to benefit from the event.
The slump in the price of latex, the raw material for rubber gloves, would be positive news to glove makers as it constitutes more than 60 per cent of the operating cost, it said.
The latex price fell to a low of RM5.97 per kg yesterday, after gyrating between RM6.00 to RM6.15 per kg in the first quarter of this year.
Following this, JF Apex has maintained its “market weight” call on the rubber glove industry as they believe the low raw material price has been priced in.
It has also maintained its neutral outlook for the industry while viewing the major outbreak of the bird flu disease as an immediate catalyst for the share price.
— BERNAMA
