Positivity in sector despite panic selling

PETALING JAYA: The panic selling of glove stocks that began on Tuesday was extended yesterday, as most major glove counters, including Top Glove Corp Bhd, Kossan Rubber Industries Bhd and Hartalega Holdings Bhd, continued to see their share prices decline.

According to market observers, the sell-down originated from Hartalega’s less-than-optimistic outlook during a conference call with analysts on Tuesday, causing funds to release their investments in the group before an intraday short-selling suspension.

At 5pm yesterday, Hartalega saw its share price close an additional 17 sen lower to RM2.44, while Top Glove, Supermax Corp Bhd and Kossan were also among the losers, down three sen, one sen and six sen to close at 97 sen, RM1.03 and RM1.91, respectively.

This meant that Hartalega, Top Glove, Supermax and Kossan would have respective market capitalisations of RM8.33bil, RM7.97bil, RM2.8bil and RM4.89bil, respectively.

A silver lining is that the sell-off yesterday was not as severe as Tuesday, reviving prospects for the sector.

On its part, Hartalega had released commendable results for its third financial quarter ended Dec 31, 2024 (3Q25), with the group posting a cumulative net profit of RM60mil.

Revenue improved to RM2bil, marking a significant turnaround from a net loss of RM2.4mil for the nine months ended December 2023, although analysts said this was below their expectations.

A stock trader told StarBiz that while Hartalega’s performance yesterday might have triggered panic-selling in other glove stocks, he remained cautiously optimistic.

“This is because Hartalega has done well so far. Additionally, the market’s average target price is RM3.58, which means there is positivity in the sector.

“Overall, we maintain a ‘strong’ view on the glove industry, supported by factors such as healthy restocking activities in the post-lockdown era and a 50% plus 10% tariff on gloves manufactured in China, which could potentially benefit Malaysian companies,” he said.

Head of equity sales at Rakuten Trade Vincent Lau, however, was forthright in his views, remarking that China has cost advantages and is selling at lower prices than local major glove players.

“With the tariff that is being imposed on China by the United States, we are faced with a familiar situation – they would redirect their gloves to other countries. This is similar to the exports of China’s electric vehicles and automotives,” he said.

The situation could be averted if China and the United States could strike a “win-win” deal allowing Chinese gloves to enter the United States market.

In addition, he said the manufacture of gloves has a relatively low barrier of entry.

“If glove stocks continued to decline until the end of the week, there would be trading opportunities,” Lau said.

UOB Kay Hian Research reported that Hartalega is also undergoing downsizing of the current headcount of 8,000 to 7,000, that would be completed within two quarters to optimise efficiency.

The research house expected the group’s margins to significantly recover in FY26 off FY25’s low base, especially when utilisation rate improves on surging demand from April 2026.

On the outlook for the equity market, Lau said it is due for a technical rebound, as it has been net-sold by foreign funds for the past few months coupled with the strong fundamentals of the component companies of the FBM KLCI.

“The upcoming result season should also lend support to our local bourse,” he said.