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Singapore Investment


 Will the love-hate relationship with glove counters continue?

The gradual increase in Bursa-listed glove counters in recent weeks would have piqued much investors’ interests.

What is keeping these counters upwards? Are glove stocks on firmer ground?

Just look at Top Glove Corp Bhd. The counter was trading at a 52-week low of 56 sen but managed to climb to RM1.02 on April 6.

In fact, the counter rose 45.7% in just over a month. This has certainly drawn much interest in Top Glove.

However, it may be still a long way before it can reach its 52-week high of RM2.04 unless there is a major occurrence such as another outbreak.

Likewise, Hartalega Holdings Bhd has gained over 30% in the past month to close at RM1.98 on April 6.

The counter is recovering from a 52-week low of RM1.41 but far from its high of RM5.05.

Despite the rally in glove stocks, not many analysts are turning positive just yet.

According to RHB Investment, Top Glove is still trading below its pre-Covid 19 historical mean.

Some of their concerns include decrease in gloves average selling prices, higher capacity expansion and higher raw material prices.

RHB was still neutral on the counter, with a new target price of RM1, pending more consistent customer demand.

According to Top Glove, the outlook does not look great as its peers, especially Chinese glove makers have started cost pass-through initiatives.

In addition, glove players’Industry-blended ASPs are said to be moderating slightly to USS20- 21/1,000 pieces from US$20-22 during the previous quarter.

The research house reckons the pace of the ASP decline remained in low single-digits, which also suggests that ASPs may have bottomed already.

Meanwhile, AmBank Research has downgraded Hartalega to sell from hold previously.

The research house pointed out that a ‘hold’ call previously after the share price spiked 26% over the past 3 weeks despite weak fundamentals.

However, AmBank cut its FY23 earnings by 82% mainly due to higher-

than-expected operating costs, particularly natural gas prices and electricity tariff.

At the end of the day, many investors will closely monitor end-clients’ inventory replenishment and ASP movements.

Looking at the weak demand, ASPs could remain volatile until the third quarter of the year when a more meaningful inventory replenishment cycle is more likely to happen.

Until then, it will be better to put your money somewhere else first.



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