Investors bullish on Malaysian glove makers following US tariff hikes on China?
KUALA LUMPUR: Last week, US president Joe Biden announced a significant increase in tariffs on Chinese products, including rubber medical and surgical gloves.
The import tariff on Chinese-made rubber gloves will rise to 25 per cent by 2026, up from the current 7.5 per cent.
This increase is part of a broader set of tariffs on US$18 billion (RM84.64 billion) worth of Chinese imports, reflecting Washington's strategy to protect US industries from perceived unfair competition.
Investors predict that the tariff hike will prompt US customers to seek alternative sources for rubber gloves outside of China
This announcement sparked a rally among glove manufacturers on Bursa Malaysia, with Top Glove Corp Bhd leading the charge.
Top Glove, the world's largest glove maker by capacity, surged 31.3 per cent or 30 sen to RM1.26, its highest level in two years, just before the closing bell on Wednesday.
Supermax Corp Bhd, Hartalega Holdings Bhd and Kossan Rubber Industries Bhd shares soared and were among the top active stocks.
On the same day, shares of smaller glove manufacturers also saw significant gains.
Comfort Gloves Bhd closed at a nearly two-year high of 56 sen.
Hextar Healthcare Bhd, formerly known as Rubberex Corp (M) Bhd, saw its shares increase by 15.22 per cent to finish at 26.5 sen.
Careplus Group Bhd rose by24.59 per cent to close at 38 sen, its highest level since January 2024.
In contrast, Zen Tech International Bhd (ZenTech), with its seven rubber glove production lines, saw its share price remain stagnant at 1.5 sen, lagging behind its peers.
ZenTech has an annual maximum production capacity worth RM85 million.
Did investors overlook ZenTech? Will ZenTech catch up this week?
ZenTech, despite its stagnation, remains a potential candidate for growth.
Investors may have initially overlooked ZenTech due to its smaller scale compared to industry giants. However, its production capacity and the overall market trend suggest that it could still benefit from the increased demand for non-Chinese gloves.
The coming weeks will be crucial for ZenTech as it positions itself to capture a share of the increased US demand.
Strategic moves such as ramping up production, improving operational efficiency, or forming strategic partnerships could help ZenTech join the rally and enhance its market standing.
The US tariff hike on Chinese rubber gloves has set the stage for a bullish trend among Malaysian glove manufacturers.
While major players like Top Glove and Supermax have already seen significant gains, the potential for smaller manufacturers, including ZenTech, to benefit remains high.
Investors should watch closely to see how these companies capitalise on the new market dynamics.
Implication of the new tariffs
The tariffs will increase the cost of Chinese gloves, making Malaysian gloves more attractive to US buyers due to the reduced price gap.
This presents an opportunity for Malaysian glove manufacturers to regain market share lost to Chinese competitors since the price war that began in 2021.
Chinese glove makers are the primary rivals of Malaysian companies in the export market for rubber gloves.
The average selling prices for Chinese gloves are expected to increase to U$20-US$21.25 per 1,000 units from the current US$16-US$17 due to the tariff hike.
This price increase could narrow the gap with Malaysian-made products, which currently sell at US$20 and are not subject to US import tariffs.
Malaysian Rubber Glove Manufacturers Association president Oon Kim Hung stated on Wednesday that about 35 per cent of Malaysian rubber glove exports go to the US market, contributing about RM4 billion in 2023.
This tariff change could further strengthen Malaysia's position in the US market, providing a significant boost to the industry.
*The writer is a lecturer at the Faculty of Management & Business UiTM. The views are the author's own and do not necessarily reflect those of Business Times.