US Tariffs Propel Malaysian Glovemakers to New Heights

Glovemakers are rallying in Malaysia as the U.S. moves to implement higher tariffs on Chinese gloves, setting off a chain reaction in the market. The announcement by the United States Trade Representative (USTR) to increase tariffs on Chinese medical and surgical gloves from 7.5% to a staggering 50% in January, ascending to 100% by 2026, has sent ripples through the global glove market.

Amidst this tumultuous backdrop, companies like Hartalega and Top Glove Corp Bhd are seeing significant gains on Bursa Malaysia. Hartalega’s stocks surged a remarkable 26.45%, closing at RM3.06 with 31.99 million shares traded, showcasing a consistent rise of about 12% this year. Meanwhile, Top Glove, celebrated as the world’s largest glove manufacturer, witnessed an 18.03% increase, with shares reaching RM1.08 and a trading volume of 85.98 million shares, marking a 14% rise year-to-date.

Other key players, such as Careplus Group Bhd and Kossan Rubber Industries Bhd, also experienced robust market activity. Careplus added 13.46%, achieving a share price of 29.5 sen, while Kossan rose by 15.85% to RM2.12 with 16.93 million shares exchanged. Supermax Corp Bhd was not left out, recording a 13.29% increase, closing at 89.5 sen with 28.82 million shares traded.

Research insights from Hong Leong Investment Bank (HLIB) highlight that this new tariff development will likely boost volumes and average selling prices (ASP) for Malaysian manufacturers, particularly in the last quarter of 2024 and the first quarter of 2025. However, the long-term impacts remain uncertain, possibly mitigated by forex volatility. Despite these variables, the glove sector’s risk-reward ratio appears favorable, nudging HLIB to upgrade the glove sector’s rating to “overweight” and maintain a “buy” rating on Hartalega and Kossan with target prices of RM3.62 and RM3.00, respectively.

Kenanga Research concurs with this optimistic outlook, upgrading the sector to “overweight” based on improved fundamentals and the U.S. tariff adjustments. The firm foresees a strong demand recovery in the latter half of 2024 and into 2025, as industry consolidation accelerates and distributors rebuild inventories. Kenanga predicts an imminent re-rating of glove stocks and has upgraded Hartalega and Kossan to “outperform” with target prices pegged at RM3.20 and RM2.60, reflecting their significant U.S. market exposure.

Both Top Glove and Supermax have received a “market perform” rating from Kenanga, with target prices of RM0.97 and RM0.83. This recalibration of ratings stems from expectations of a near-term earnings surge, compounded by diminished predatory pricing behaviors amidst rising Chinese production rates.

As the landscape shifts, stakeholders and investors watch closely, aware that this regulatory maneuver by the U.S. may reshape market dynamics, presenting both challenges and opportunities for Malaysian glovemakers.