By Lawrence Yong
Speculative buying on news of a new strain of bird flu virus in China has reinforced the upside potential of shares of Malaysia’s top medical glove makers such Supermax and Top Glove, which already rose 4-6 percent over the past two weeks on strong expansion plans.
Heavy buying and selling were seen on the companies’ shares. Top Glove saw over 2.4 million of its shares exchanged on Tuesday by midday, nearly twice its four week’s average volume. It was trading at RM5.91, down 6 sen. Meanwhile, Supermax saw volumes of over 8.5 million changing hands, about 4 times more usual. Supermax was trading at RM2.09 at midday on Bursa Malaysia, down 6 sen.
Four new cases of H7N9 bird flu have been confirmed in China in 24 hours by Monday evening, bringing the total number of infections to 24, while seven patients have died so far, Chinese health authorities said in latest news reports.
Analysts said that it was too early to quantify the economic impact on glove makers. “We think the sharp run-up in share prices of rubber glove stocks on news of an outbreak of the H7N9 flu strain last week is purely speculative, as the virus has yet to have any material impact on demand,” Maybank IB Research noted.
AMInvestment Bank Research however said that based on past experience, a flu pandemic would boost glove demand. The last three pandemics (2003: SARS; 2007: H5N1 avian flu; 2009: H1N1 swine flu) saw worldwide glove demand rise by between 11-24 percent in the year they occurred, it noted. Demand had outstripped supply in 2009.
“This current outbreak is positive for the domestic rubber glove manufacturers, should this isolated event manifest itself into a prolonged and global pandemic. The situation should result in an uptick in usage of examination gloves, which make up the bulk of rubber glove exports,” a AMResearch report noted.
Malaysia, the world’s third biggest rubber grower, is also the world’s biggest supplier or rubber and latex gloves through Top Glove and Supermax. AMResearch noted that Malaysia holds up to 63 percent of world market share, 88 percent of which are rubber glove exports. However, it cautioned that the local manufacturers may have minimal exposure to the China market as it was dominated by the lower-end plastic (eg. vinyl) variants.
Even before the news of the H7N9 outbreak in China, Malaysia’s glove manufacturers were expected to expand output by 11-15 percent in 2013 on robust demand from U.S. and Europe.
A MIDF Investment Research report said that Top Glove, with a current capacity of 40.3 billion pieces of gloves per annum, now controls 25 percent of the global market share for rubber gloves. The Group had targeted to capture 30 percent of the world market by December 2015.
The top four players are investing RM650 million to boost their installed capacities by about 14 percent, analysts said. Other smaller glove makers in Malaysia include Kossan Rubber Industries and Hartalega Holdings Bhd.
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