Upward trend on the cards for glove counters

KUALA LUMPUR: While the economy has seen a sharp downturn due to the Covid-19 pandemic, the glove industry has bucked the trend surging beyond market expectations.

Malaysia which holds 65 per cent of the global glove market share has seen listed companies on the local bourse enjoying exponential hike in share price following stronger demand.

Since March up to mid-August, seven Malaysian companies namely Top Glove, Hartalega, Supermax, Kossan Rubber, Careplus Group, Rubberex and Comfort Gloves have seen RM80 billion being poured into the stock market.

Top Glove and Hartalega were among the top 30 companies listed on the FTSE Bursa Malaysia KLCI by market capitalisation, that have seen their price per earning (PE) ratio soar to more than 75 per cent throughout the period.

As for the other companies, the stock rise was led by Supermax which surged more than 1000 per cent in the duration.

The sharp increase in the PE ratio of each stock was indicative of an overbought position.

To reduce the impact of declining value as well as increase affordability for investors, companies often conduct share split exercise.

However, after Top Glove and Supermax conducted the share split, momentum shifted to pharmaceutical stocks driven by vaccine optimism as well as equity repositioning mainly by retail investors.

This caused the related stocks to experience a sharp decline since last week on weak buying sentiment, leading these companies to conduct share buyback to boost investors’ confidence as well as increase their equity holding.

It also raised questions as to whether the bull for glove counters has subsided.

Over the past two weeks, glove counters have been under intense selling pressure driven by two main reasons.

According to an equity analyst, the main reasons were cashing out on the exponential gain as well as repositioning to other stocks especially pharmaceutical and technology.

“After nine trading days, the tables have turned again in favour of the glove counters following the halting over vaccine trial by UK based AstraZeneca due to complications as well as the continuous surge of Covid-19 cases globally,” the analyst said.