Xiiao xiann wrote a post · Sep 17, 2024 15:49

US Raises Higher Tariffs on China, Malaysian Glove Stocks Soar on News

(Kuala Lumpur, 17th news) The US imposes higher tariffs on Chinese gloves than expected, stimulating a surge in local glove stocks, among which the most favored by the market. $HARTA (5168.MY)$ has hit the limit up!

Industrial Investment Bank's research report today states that the United States has confirmed a substantial increase in commodity tariffs on China, with the tariff rate for gloves set to increase to 50% from 2025 and further increase to 100% in 2026.

Analysts believe that the punitive measures against China by the United States will bring significant spill-over effects for Malaysian glove manufacturers, and the average selling price of Chinese gloves may exceed Malaysia's as early as next year.

Previously, the proposed import tariff on Chinese gloves by the United States is set to increase to 25% in 2026, which is much lower than the current adjustment level.

Analysts further said that this could lead to an average selling price of Chinese gloves rising from the current $17 to $25.50 in 2025, or even $34 in 2026.

Therefore, this will bring price advantages to Malaysian glove manufacturers, as their comprehensive average selling price is only between $20 and $21.

As a result, analysts do not rule out the possibility that Chinese operators may consider expanding into overseas markets to avoid high tariffs.

However, we believe that this expansion will cause Chinese operators to lose their cost competitiveness, as they cannot achieve cost savings through coal production overseas.

With the United States determining a significant increase in Chinese goods tariffs, it means that the price gap between Malaysian and Chinese gloves will narrow, and many brokerage firms have also raised their ratings on glove manufacturers.

A research analyst from CIMB Investment Bank stated that given the recent weak performance of the industry's stock prices and the tariff situation between the United States and China, the risk-return ratio is expected to become favorable. The Malaysian glove industry may regain market favor and raise its rating from "neutral" to "shareholding".

Recover market share?

In addition, Great Wall Securities analysts wrote in their report that the adjustment of tariffs has boosted investment confidence in the Malaysian glove industry.
Despite the slowdown in industry demand, the overall recovery is accelerating, and Malaysian glove manufacturers are expected to reclaim market share occupied by Chinese players.
However, the view of Fenglong Investment Bank's research is that this may not necessarily help Malaysian players to capture more market share in the global market.
Because Chinese players may shift their market focus from the United States to Europe and Asia, and in a market that is in balance, the possible shift may only affect the cohort.
In any case, the tariff adjustment from the current 7.5% to 50% represents a substantial increase of 42.5 percentage points.
We believe that the 3.5-month window until 2025 will stimulate glove sales and average selling prices in the fourth quarter of 2024 and the first quarter of 2025.
Furthermore, the glove tariff rate imposed by the United States on China will further increase to 100% in 2026, which is 92.5 percentage points higher than the current level.
According to the research estimation by Fenglong Investment Bank, the supply and demand of the glove market will reach a balance in 2025, with a factory utilization rate of about 85% for global players, and the industry situation will continue to improve in 2026.

Glove stocks are excited by the news.

Due to the overall situation favorable to the Malaysian glove industry, glove stocks surged across the board on Tuesday, with active trading sentiment.
Among them, Hartalega's momentum is the most eye-catching, opening at the limit up and surging 29.75% or 72 cents to close at 3.14 ringgit.
In addition, $KOSSAN (7153.MY)$ Not to be outdone, it rose 36 cents or 19.67% to 2.19 ringgit in early trading.
Following closely behind is $TOPGLOV (7113.MY)$ Top Glove (TOPGLOV, 7113, main board healthcare stock) surged 24.59% or 22.5 cents to 1.11 ringgit in early trading, also the hottest stock in the market.
$SUPERMX (7106.MY)$ Supermax (SUPERMX, 7106, Main Board Health Care Stock) reported 92 cents, an increase of 13 cents or 16.46% compared to the closing price of 79 cents last Friday.
Overall, glove stocks dominate the top gainers and hot lists, driving the health care sector index to surge by 9.63%.

US glove import portfolio (only Malaysia and China)

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