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Glove stocks battered

PETALING JAYA: The exodus of investors from glove stocks showed no signs of stopping even as valuations turned more attractive such as in the case of Top Glove Corp Bhd, where its price-to-earnings ratio (PER) dropped to a single digit.

Another round of heavy selling yesterday among the Big Four glove counters wiped out about RM6.3bil in market capitalisation.

With investors appearing to be running out of patience on the glove stocks’ movement, this has in turn exerted pressure on the FBM KLCI, making it one of the few underperformers among the Asian stock exchanges yesterday.

Top Glove, Hartalega Holdings Bhd and Supermax Corp Bhd, which are the three FBM KLCI component glove stocks, dragged down the index by nearly 12 points.

The three stocks were also the FBM KLCI’s worst performers yesterday.

The FBM KLCI fell by 10.61 points or 0.67% to 1,567.14 points, although it was partially buoyed by the likes of IHH Healthcare Bhd, Tenaga Nasional Bhd and Genting Bhd.

Apart from the partially-allowed short-selling activities, analysts think the continued selling by retail and institutional investors is fuelling the glove stocks’ downtrend.

A common reason cited by experts is the rollout of vaccination programmes globally that has led investors to question the sustainability of glove makers’ supernormal profits.

Meanwhile, in the case of Top Glove yesterday, investor sentiment appeared to have been affected by the glove maker’s plan to raise RM7.7bil via a primary dual listing in Hong Kong.

Analysts expect the primary dual listing to dilute Top Glove’s earnings per share up to financial year 2023.

Areca Capital CEO Danny Wong said that investor sentiment on glove stocks in the near term will remain weak on the back of potential earnings concerns.

“Confidence among investors will only return once these glove makers can prove their ability to deliver continued high profits in the upcoming quarters.

“Perhaps, with such results, glove stocks will start to move upwards again, ” he told StarBiz.

Wong has a long-term positive view on glove stocks.

“In the post-pandemic period, we won’t be seeing glove demand dropping back to pre-Covid-19 levels.

“This is largely because the awareness on hygiene has increased across different industries.

“With Malaysia being the major producer of gloves, we will surely benefit from the demand for gloves, ” he said.

Currently, valuations of glove stocks appear to be compelling against the still-strong earnings projections by analysts.

The world’s biggest glove maker, Top Glove, had a PER of 9.7 times as of yesterday, after its share price fell to RM4.90.

Hartalega and Supermax, meanwhile, had a PER of 17 times and 4.91 times, respectively.


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