Slimmer advantage for local glove makers
In a report to clients, CIMB Research said it was maintaining its 'neutral' stance on the rubber-glove sector, owing to ongoing headwinds, including persistently sluggish demand recovery due to cautious purchasing patterns, elevated costs stemming from the recent rise in Malaysia's sales and service tax and the minimum wage, and weak average selling prices (ASPs) in an oversupplied market.
CIMB Research said that while Malaysia no longer holds a rate advantage over Thailand, Indonesia or Cambodia, the 19% tariff is still lower than Vietnam's 20% and China's 30%, offering marginal competitiveness in the US market.
'We expect some incremental shift in US glove orders to Malaysia, but higher tariffs will still increase cost base for US buyers, which may limit restocking or lead to leaner inventories,' the research house said.
Meanwhile, Chinese and Vietnamese glove makers are likely to redirect supply to non-US markets at more competitive prices, intensifying global pricing pressure, it added.
Maybank Investment Bank Research also said it was maintaining its 'negative' stance with no change to earnings forecasts for now.
'We believe upcoming results could be weak mainly due to the weakening US dollar versus the ringgit,' the research house said.
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