Rubber gloves likely to rise on Wuhan virus fears
January 23, 2020
KUCHING: Both prices and shares of rubber glovemakers will likely rise as glove demand could surge as customers stock up as a pre-emptive measure against the ongoing Wuhan coronavirus.
On Tuesday, the World Health Organisation ( WHO) said it is considering declaring an international health emergency on the China pneumonia outbreak (2019-nCoV; the coronavirus), which was first discovered in Wuhan.
“As most manufacturers are already operating at close to their optimal utilisation rates (close to 90 per cent), a sudden surge in demand will likely push average selling prices (ASPs) higher, which will lead to an improvement in the manufacturers’ margins,” Affin Hwang Investment Bank Bhd’s research team said yesterday.
“Although there has yet to be any spike in glove demand arising from the latest incident (human-to- human transmission), we believe this would help raise the awareness for the need of a proper protection barrier for medical professionals.”
Under its coverage, it believed glove manufacturers such as Top Glove Corporation Bhd (Top Glove) would likely benefit the most as the company is currently only operating at 85 per cent.
“However, it is still too early to determine whether the current outbreak would spur demand similar to SARS in 2002/03. China currently accounts for two per cent of Malaysian rubber glove sales, but the incremental sales (if any) are more likely to arise from the other regions, which could be impacted by the spread of the virus. Thailand, Japan and South Korea have reported confirmed cases of the coronavirus,” it added.
Meanwhile, analysts generally believe rubber gloves sector share-price performance is expected to react positively as it did during previous pandemics/ epidemics reported by the WHO (SARS in 2002 to 2003, H1N1 2009 to 2010 and EBOLA 2014 to 2016).
As at 2.30pm yesterday, rubber glove manufacturers such as Top Glove, Kossan Industries Bhd (Kossan) and Hartalega Holdings Bhd (Hartalega) were among the top 10 gainers dominating the gainers’ list on Bursa Malaysia.
“Although the share-price performance for the rubber glove manufacturers tends to react positively on the news flow of virus outbreaks (either pandemic or epidemic), share prices also correct subsequently, as the incremental real demand varies from case to case.
“Nonetheless, we believe that news about an outbreak is good for the sector (demand) in the long run, as it helps to raise the awareness for the need of a protection barrier for medical