22-04-2025
- Business
- Malaysian Reserve
Steep tariffs won't reverse global glove oversupply, Top Glove is still 'Sell' at AmInvestment
A LOCAL investment bank has retained its 'Underweight' rating on the glove sector as it believed the recent imposition of steep tariffs on China-made gloves by the US government, while directionally positive, will not be sufficient to reverse the structural oversupply challenges facing the global glove industry.
'Despite near-term optimism over potentially firmer average selling price (ASP) in the US market, we remain cautious as supply dynamics, cost inflation, and strategic shifts by Chinese players continue to weigh on sector fundamentals,' AmInvestment Bank Bhd said in a report released yesterday.
Despite the recent selldown, it has maintained 'Underweight' on Kossan Rubber Industries Bhd, with a 52-week target price (TP) of RM1.60) and 'Sell' on Top Glove Corp Bhd (TP: 68 sen). It has maintained its 'Hold' call on Hartalega Holdings Bhd with a lower TP of RM2.30, down from RM3.00 previously as it believed that the intensifying competition in the US market might erode its premium pricing over the medium to long term.
At the end of yesterday's trade, Kossan closed at RM1.80, Hartalega at RM2.22 and Top Glove at 86 sen.
Elaborating on the structural oversupply, the report noted that although the US government's imposition of a 145% tariff on all Chinese goods – rising to 195% for medical gloves in 2025 and 245% in 2026 and 170% for non-medical gloves – may initially appear supportive of ASP for non-Chinese producers, it believed this impact will be short-lived and insufficient to meaningfully shift the sector's demand-supply balance.
It said the global glove market remains structurally oversupplied, a hangover from the aggressive capacity expansions during the pandemic boom.
'Most manufacturers, particularly in Malaysia and China, have not meaningfully scaled back capacity, even as demand normalises at pre-COVID levels. With total global installed capacity still significantly above annual demand, pricing discipline is unlikely to return in the near to medium term,' it said. — TMR
