By Stella Goh

The demand of gloves has surged due to Covid-19 pandemic. There are many companies take advantage of this opportunity to enter into the glove market. However, it is not easy for a small business startup to sustain in this business competitive environment after the outbreak. Therefore, the industry layout will not have large impacts in the long run.

Top Glove’s Average Selling Price (ASP) has rose 20% - 40% in August and September, and the company expects to pay a higher final dividend. However, the average selling price of gloves have gone up due to increase in the market demand. Therefore, Top Glove held a special shareholder’s meeting (EGM) on 18 August 2020 for a 2 for 1 bonus issue.

The U.S. Customs and Border Protection (CBP) issued a seizure order on 15 July 2020 against Top Glove and its subsidiary TG Medical Private Limited, suspending the import of disposable gloves made by both. The dispute over the seizure order will be resolved by the end of August 2020.

As the profits of the glove industry soared, securities companies expected the government to announce relevant policies in FY2021 budget in November 2020. According to the Top Glove’s Chairman Lim Wee Chai, the government still have not consult the company and the Malaysian Rubber Glove Merchant’s Union (MARGMA) on this matter, and the government has no intention of imposing a windfall profit tax on the glove industry.

If the government imposed a windfall tax on manufacturing, it could lead to local manufacturers move to Thailand, Vietnam, Indonesia and other countries that offer more attractive tax incentives. For example, corporate taxes are 24% and Thailand’s are 20%. Despite the bad news about gloves, the glove stocks rebounded strongly in these sessions after several consecutive trading days, and Top Glove was no surprise to include in the Top 10 rising stocks.

The plan of bonus share distribution was approved by shareholders and passed smoothly. Top Glove will announce it on 20 July 2020 that will issue up to 5.476 billion of bonus shares at a ratio of 1:2.

China is actively expanding the gloves. Will this lower down the price of gloves?

According to Top Glove, it will take at least nine months to set up a new large-scale production line. Global restrictions on movement will also slow down the inclusion plan of China enterprises. He said that as compared to China, domestic gloves industry has advantages in its technology, cost and raw material supply.

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