KUALA LUMPUR: Industry players and analysts have tempered down the positive impact for Malaysian rubber glove companies after the US hikes tariff on Chinese gloves.
They also believe the glove stocks' rally on Wednesday was only a knee-jerk reaction and adviced investors to be vigilant.
Malaysian Rubber Glove Manufacturers Association president Oon Kim Hung said while the news may bode well for the local players, it does not expect much immediate impact, as the hike will only take effect in 2026.
"About 35 per cent of our rubber glove exports are to the US market, contributing about RM4 billion in 2023. However, we should not forget that the US also has its own domestic production.
"We believe that Malaysian producers should continue to invest in ESG matters, and the way forward is to establish sustainable and equitable prices," Oon said in a statement.
MIDF Research remaina cautious as intense competition is expected to continue exerting upward pressure on pricing for all glovemakers within its coverage.
The firm made no changes to its companies' earnings forecast or recommendations, and kepr its sectoral calls unchanged pending further clarification, especially since Kossan Rubber Industries Bhd and Hartalega Holdings Bhd are scheduled to release its results this month.
"On the positive side, the replenishment of inventory following the expiration of pandemic stockpiles is anticipated to bolster glove demand and improve sales.
"The recent permanent and temporary closures of some production facilities could enhance production efficiency and decrease production costs per unit.
MIDF Research maintained a "Neutral" call on the glove sector.
It does not have a top pick, as all glovemakers within its coverage are predominantly rated "Neutral" or "Sell".
Hong Leong Investment Bank Bhd (HLIB), meanwhile, the US tariff will not have a material incremental effect to its forecast 2026.
However, HLIB believes that Chinese players' decision to gradually shift their target markets from the US to European and Asian markets will result in a near-term trade diversion from the US to Malaysia.
"This will benefit most Malaysian players, albeit biased towards Hartalega and Kossan," it noted.
HLIB said with Wednesday's share price rally following the US tariff news, the recovery thesis by calendar year 2025 has now been priced in.