11 hours ago
- Business
- Free Malaysia Today
Malaysian glove makers to gain as EU targets China
The European Union accounts for almost 30% of Malaysia's total glove exports.
PETALING JAYA : Malaysian glove makers are likely beneficiaries of the European Union's move to exclude Chinese companies from public tenders for medical devices, including gloves, valued at over €5 million (RM24.6 million).
CIMB Securities said the exclusion could result in stronger demand from EU buyers seeking alternatives to China-sourced gloves.
The EU's move is a response to its finding that EU companies do not have fair access in China as Chinese tenders have been heavily biased towards local suppliers with artificially low bids, the research house said.
'This will limit Chinese companies' access to approximately €150 billion (RM738.9 billion) annually in EU public spending within this segment.
'While tenders exceeding €5 million accounted for only about 4% of total tender count in 2023, they represented around 60% of total tender value,' it said in a note today.
The EU is a strategically important market for local glove manufacturers. The bloc was Malaysia's second-largest glove export market by region in 2023, accounting for an estimated 28%–30% of Malaysia's total glove exports, said CIMB.
The potential increase in demand would be an added boost for the local glove sector on top of expected expansion in the US rubber-glove market, it added.
However, CIMB expects any rise in EU demand for gloves from other countries, including Malaysia, to be short-term – three-to six months at best, as the EU and China have expressed willingness to negotiate.
This issue would likely be a topic of discussion during the EU-China Summit scheduled for next month.
'While we anticipate potential near-term share price re-ratings for glove stocks following this announcement, we expect Chinese glove makers to pursue workarounds, such as leveraging EU-based trading partners, or exporting from manufacturing facilities outside China,' it noted.
CIMB has maintained its 'neutral' recommendation on the glove sector because of persistent challenges. This includes a 'difficult operating environment' with low sales demand, and higher costs due to the recent rise in the sales and service tax and minimum wage.
