Malaysia glove demand to rebound in 2H25
The firm said that following slower inventory movement in 1H25 due to the front-loading effects of US customers purchasing from Chinese makers, this could spark a sudden surge in orders.
It believes the current concern of Chinese glove makers further lowering average selling prices (ASPs) is overplayed, since the current ASPs of US$15 to US$17 per 1,000 pieces are higher than the previous down-cycle ASP of US$13 per 1,000 pieces.
"Anecdotal evidence suggests that despite the impact of tariff-related disruptions, there is only so long customers can hold off making purchases.
"If past history is any guide, based on previous down-cycles, Malaysian glove makers' stock prices will start to re-rate once the ASP concerns subside, and demand starts flowing back to Malaysian glove makers," it said.
Meanwhile, Kenanga Research said the EU decision and US tariff on Chinese glove makers could benefit Malaysian glove makers.
The firm said the potential increase in demand would be an added boost for local glove players on top of expected expansion in the US rubber-glove market.
Assuming both EU and US orders flow back to Malaysian glove makers gradually in 2H25, the firm said Malaysia could see an aggregate of 70 billion pieces – 35 billion from the EU and 35 billion from the US.
Overall, Kenanga Research has maintained an "Overweight" rating on the sector.
It said Malaysian glove stocks are trading at deep value levels, pricing them close to the worst of the down-cycle.
"The glove sector under our coverage is currently trading at negative two standard deviations below its historical one-year forward average.
"While earnings may remain weak in the near term, structural demand and supply rationalisation offer long-term upside.
"We prefer selective exposure to quality names like Hartalega Holdings Bhd and Kossan Rubber Industries Bhd," it added.
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