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Shares in homegrown rubber glove manufacturer Top Glove Corp spiked more than 400% year-to-date while the company created more job opportunities during the pandemic.
Since the last week, trade with tech stocks fell a bit but one other sector aroused investors’ thoughts. In Southeast Asia, producers of rubber gloves are attracting more investor enthusiasm than even the electric cars and solar panels of Elon Musk. A glove maker called Top Glove Corporation (KLSE: TOPGLOV) stock rocketed 389% this year in Kuala Lumpur, the most of all on the MSCI Asia Pacific Index. Just for comparison, Supermax Corporation (KLSE: SUPERMX) has surged more than 1,000%, compared with Tesla Inc’s (NASDAQ: TSLA) 259%. Of course, this doesn’t surprise us since the glove demand was heavily increased due to the COVID-19 outbreak and was helped by a short-selling stock ban in Malaysia till year-end.
The huge increase has been remarkable by Malaysian standards, with the top three glove makers adding approximately 109 billion ringgit ($26 billion) in combined market value this year. More than $1 of every $10 invested in the nation’s stock market right now goes as a bet on gloves – an accomplishment that makes the Southeast Asian nation huge player in the global hygiene sector, something as South Korea and Taiwan are to semiconductors. Top Glove resumed its rally Friday with the rise of more than 14% even after the United States decided to block imports from two of its units.
Ross Cameron, a fund manager at Northcape Capital Ltd., which oversees about $7 billion in assets globally stated:
“The rally in glove makers reminds many of Tesla but the sector’s earnings outlook is more certain than that of Tesla. The short-selling ban has had a minor contribution to the rally while we expect the sector to report significantly more than 100% earnings growth next year.”
Widened Bets on Hygiene Sector Push Glove Makers on Stock Market
Fund managers at Northcape and Samsung Asset Management have widened their bets on the hygiene sector this year, with the belief that the recent change in glove demand is structural and many market participants are still behind the curve.
Few of the glove makers are even intending to do bonus share issues after this year’s miraculous rally. The possibilities of some stocks getting more institutional allotment are set to rise as the companies have become strong enough to be involved with the main indexes followed by international traders.
Supermax and Kossan Rubber Industries Bhd. Allegedly intend to join the MSCI Malaysia Index after a review next month due to the amazing growth within their stock price.
If Coronavisrus Is Contained, Demand Will Fall
Kossan shares have inclined by 225% year-to-date. However, a quicker-than-expected evolvement of a coronavirus vaccine comes with certain risks. One of those is halting this spectacular rally in glove makers’ shares. The U.S. Customs and Border Patrol recently put a custody order on disposable gloves made by Top Glove. Top Glove said in a statement last week that this situation could be connected with foreign workers and it is now reaching out to U.S. customs to ask for possibilities in order to resolve the matter in the next two weeks.
Fund managers and analysts stressed the company could still export its product to the U.S. using other units. Also, any cancellation of orders would be balanced by demand from other countries due to the big deficits.
According to Hong Leong Investment Bank Bhd. analyst Farah Diyana Kamaludin, the Malaysian Rubber Glove Manufacturers Association expects global glove demand to rise 20% to 330 billion gloves this year. Be it as it may, now the books are completely swollen and glove prices have severely jumped and companies are aggressively expanding their capacity to meet orders.