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Glovemakers' shares surge, amid coronavirus outbreak

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Glovemakers' shares surge, amid coronavirus outbreak Others

KUALA LUMPUR: Shares of rubber glove companies dominated Bursa Malaysia’s top gainers list yesterday, with Top Glove Corp Bhd climbing to its all-time high, amid rising global fears of the coronavirus (2019-nCoV).
As the worldwide demand for medical gloves is expected to surge rapidly, Top Glove and four of its peers made up the top half of the 10 most gainers yesterday.
Top Glove surged 46 sen or 8.3 per cent to a record RM6, followed by Adventa Bhd, Kossan Rubber Industries Bhd, Supermax Corp Bhd and Hartalega Holdings Bhd.
Adventa rose 47.11 per cent or 28 sen to 89 sen, Kossan went up 5.47 per cent or 26 sen to RM5.01, Supermax edged up 15.53 per cent or 25 sen to RM1.86 and Hartalega added 3.65 per cent or 22 sen to RM6.25.
Pemandu associate executive vice-president Ku Kok Peng said the outbreak would benefit glove makers with capacities to ramp up production to meet the burgeoning demand, especially in China where the outbreak originated.
“The situation will be positive for the local glove industry. However, it depends on whether they (glove manufacturers) have the current capacities that they can produce in meeting the demand from places that have been affected by the outbreak,” he told the New Straits Times yesterday.
Ku said demand correlates to the severity and duration of the outbreak, adding that if the affected countries can contain the outbreak, demand was likely to reduce.
The 2019-nCoV, which emerged at a seafood market in the Chinese city of Wuhan, has been spreading in China and across several countries in Asia Pacific, Europe and North America.
It was reported that there were over 4,500 cases of Wuhan coronavirus with a total of 106 deaths.
JP Morgan Securities (Malaysia) Sdn Bhd analyst Hoy Kit Mak said there would likely be an incremental upside for glove producers if the Chinese government imposed stricter medical standards including mandatory usage of examination rubber gloves.
“This could see higher glove usage per capita from six currently. China has one of the world’s lowest rubber glove usage per capita.
“Assuming China’s population of 1.4 billion were to increase usage by 1.0 per cent per person, this will result in 0.5 per cent incremental estimated global consumption of rubber gloves,” he added.
The investment bank upgraded Top Glove and Hartalega with a revised target price of RM6.30 and RM7.30 respectively.
“An acute and heightened pandemic leading to higher than expected sales volume growth and margins poses upside risks to our earnings forecast,” Hoy said.
However, he said the downside risks included sharp increases in raw material prices and higher-than-expected pricing competition in the latex glove segment.
The Malaysian Rubber Glove Manufacturers Association (Margma) president Denis Low assured an adequate supply of medical gloves.
“In particular, China is now requesting for more urgent shipments and we believe our members have already obliged and are ramping up production to meet the request from China,” he said in a statement yesterday.
“Margma believes that demand for gloves will inevitably shoot up (increase further) and has urged its members to give priority to those affected areas and countries,” he added.
Kenanga Research said even if nCoV had yet to spread to Malaysia, the impact on tourist arrivals from China and elsewhere would be enough to affect the Visit Malaysia Year campaign and to a certain extent, the economy at least in the first six months.
The firm said during the Severe Acute Respiratory Syndrome (SARS) virus in 2002-2003, the outbreak had seeped into the economy mainly through the confidence and demand channels, with the adverse impact materialising in the late March, lasting until end-May, after which it gradually abated.
“Based on the 2003 SARS experience, the post assessment stipulated that the domestic economy was not able to fully thwart the impact of the epidemic as policy action was taken slightly late in the second-quarter of 2003,” it said.
The firm expects the authorities to be more proactive to take necessary measures to support the economy before the coronavirus weigh on the domestic demand.
“On the impact to the overall economy, we would assume the measures expected to be taken by the government would help to soften the adverse spillover from nCoV,” it said.
Kenanga Research said barring a full-blown epidemic and death toll increase at an alarming rate, it kept Malaysia’s gross domestic product growth forecast of 4.3 per cent this year.

sourceNew straits times

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