KUALA LUMPUR (Sept 17): Shares of glove manufacturers surged on Tuesday, led by Hartalega Holdings Bhd (KL:HARTA) and Top Glove Corp Bhd (KL:TOPGLOV), after the US Trade Representative (USTR) announced that tariffs on Chinese gloves will be raised to 50% in 2025 and 100% in 2026.

Hartalega opened and closed limit up at 72 sen or 29.75% higher to RM3.14, from Friday's last trading price of RM2.42, while Top Glove rose 29.5 sen or 32.24% to a high of RM1.21, from 91.5 sen last Friday, before closing at RM1.14, still up 22.5 sen or 24.59%.

Supermax Corp Bhd (KL:SUPERMX) rose as much as 21 sen or 26.58% to RM1 before paring gains to 93 sen, still up 14 sen or 17.72%. The counter closed at 79 sen last Friday.

Kossan Rubber Industries Bhd (KL:KOSSAN) rose as much as 48 sen or 26.23% to RM2.31. At 5pm, the counter closed at RM2.25, still up 42 sen or 22.95% from last Friday’s close of RM1.83.

The glove makers were the top gainers and top active counters at the morning trading session on Tuesday, supporting the Kuala Lumpur Healthcare Index’s 10.93% rise against the 0.73% increase in the KLCI.

Lower liners also rose, including Comfort Gloves Bhd (KL:COMFORT) (up 5.5 sen or 14.87% to 42.5 sen at the time of writing), Careplus Group Bhd (KL:CAREPLS) (up 4.5 sen or 17.31% to 30.5 sen) and HLT Global Bhd (KL:HLT) (up 1.5 sen or 10.71% to 15.5 sen).

Last Friday (Sept 13), USTR said it locked in higher import tariffs on Chinese-made rubber medical and surgical gloves at 50% in 2025 and 100% by 2026, a surge from the previous initial proposed 25% in mid-May 2024.

The tariff increase, from 7.5% currently, is expected to lift both volume and average selling price (ASP) in the fourth quarter of 2024 (4Q2024) and 1Q2025, said HLIB Research in a note.

“With recent share price weakness and positive development from USTR, we believe the risk-reward ratio has once again become favourable and the glove sector could regain market interest,” said the research house, which has upgraded the sector to "overweight".

Public Investment Bank, separately, noted that the higher tariffs are expected to narrow the price gap between Chinese and Malaysian gloves, improving the competitiveness of Malaysian players.

Chinese gloves are currently priced at US$17-18 (RM72.80-77.09) per 1,000 pieces, while Malaysian gloves are priced at US$20-21 per 1,000 pieces. “Assuming Chinese manufacturers do not absorb the increased tariffs, the price gap of US$2-3 per 1,000 pieces is expected to narrow further,” the research house said, reaffirming its “overweight” rating on the sector.

Hartalega is expanding its NGC1.5 production line, which will increase capacity by 16% by FY2025, while Kossan is adding six automated production lines by FY2024. Top Glove is on track to complete two new factories, which will boost its annual production capacity by 6% to 69 billion pieces, it noted.

Meanwhile, Kenanga Research said in a separate note to investors that easing oversupply pressures are providing further support to the sector. "Oversupply is less acute than we had previously forecast, in turn potentially achieving equilibrium faster than expected, by 2026."

“The oversupply situation will gradually improve following signs of players culling production capacity via decommissioning of selective plants and exit of new entrants," the research firm said, revising its global supply estimate to 500-530 billion pieces, down from an earlier forecast of 600 billion pieces.

"From our recent channel checks, we believe the market is witnessing a faster-than-expected industry transitioning into a rationalisation and consolidation phase from massive industry over-capacity," it added.

Still, the industry players are required to have "cost efficiency and technology to remain competitive", according to Maybank Investment Bank in a note, while maintaining its "positive" stance on the industry.

"While Malaysia glove makers are expected to see strong earnings in the next 12-15 months due to rising demand and stabilising ASP, we remain cautious on the long-term outlook due to ongoing competition from China," the bank said. Key players like China's top nitrile glove companies — Intco and Blue Sail — are expanding capacity in Indonesia, Thailand, and Vietnam, it noted.