Excessive glove stock traction from IHU & Omicron?

Excessive glove stock traction from IHU & Omicron?

The emergence of new Covid-19 variants namely Omicron and IHU may not provide excessive traction for share prices of glove makers, according to market observers.

KUALA LUMPUR: The emergence of new Covid-19 variants namely Omicron and IHU may not provide excessive traction for share prices of glove makers, according to market observers.

Although the new variants were positive to heighten sentiment, they would only be a temporary knee-jerk reaction and were not fundamentally pushing glove stocks drastically, they added.

On Wednesday, shares of Hartalega Holdings Bhd, Top Glove Corp Bhd, Kossan Rubber Industries Bhd and Supermax Corp Bhd rose in an apparent reaction to news on the emergence of IHU particularly.

Areca Capital Sdn Bhd chief executive officer Danny Wong Teck Meng said ultimately, the movement of glove counters would be dependent on the demand and average selling prices (ASPs) over the next one year.

"Demand for gloves surged in the past two years due to the Covid-19 pandemic. With the additional variants, that does not mean more gloves will be used," he told the New Straits Times.

Wong said while global demand was still there, the oversupply of gloves continued to heighten as more new players and existing gloves makers began to ramp up production.

"The market will price in the oversupply issue and demand could subside. Supply is a permanent continuity (more factories in the making) but demand is temporary (due to the Covid-19 pandemic)."

He added that the market was skeptical on whether ASP can be maintained at the current level.

Rakuten Trade Sdn Bhd head of equity sales Vincent Lau concurred that the early rising of glove stock shares were based on the sentiment on the new variant.

It was unlikely the current situation would be sustainable in the long-term, he said, adding that it was merely trading opportunity.

"It is a knee jerk reaction. I don't think for a long term, it can support the share price as the situation is gradually becoming an endemic with the accelerated booster shot," Lau told the NST.

Hong Leong Investment Bank Bhd (HLIB) said nitrile butadiene rubber prices were expected to continue trending lower, due to additional incoming capacity and tapering demand of nitrile gloves.

It added that latex prices were also likely to increase in the coming months due to the La Niña phenomenon, followed by wintering period.

"ASPs are also expected to continue declining, by a lower quantum of 5.0 per cent month-on-month as glove prices have fallen closer to pre-Covid levels."

HLIB said current nitrile glove ASP stood at US$25 to US$30 per 1,000 pieces compared to the pre-pandemic level of about US$21.

On Wednesday, Top Glove's shares rose 11 sen or 4.7 per cent to RM2.44, Hartalega increased 23 sen 4.2 per cent to RM5.75, Kossan Rubber gained nine sen or 4.8 per cent to RM1.96, while Supermax eased seven sen or 4.9 per cent at RM1.51.

As at 4.15pm on Thursday, Top Glove eased two sen or 0.82 per cent at RM2.42, Hartalega remained unchanged at RM5.75, Kossan Rubber increased two sen or 1.02 per cent to RM1.98, while Supermax eased one sen or 0.66 per cent at RM1.50.

https://www.nst.com.my/business/2022/01/760996/excessive-glove-stock-traction-ihu-omicron