Glove makers soar after Biden slaps higher tariff on Chinese gloves
Published on: Wednesday, May 15, 2024
By:
FMT, Lee Min Keong
US president Joe Biden announced new tariffs on US$18 billion worth of Chinese imports including medical gloves to protect US industries. (Bernama pic)
PETALING JAYA: The shares of Malaysian glove makers surged today on news that the US has raised tariffs on Chinese-made medical gloves to 25% from 7.5%.
Top Glove Corp Bhd’s shares jumped as much as 30% or 28 sen to RM1.24 in the morning trade, valuing it at almost RM9.9 billion. It was also the most heavily traded stock on Bursa Malaysia with 369.08 million shares changing hands by the midday break.
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In second place was Supermax Corp Bhd, which saw 210.5 million shares traded. Its share price jumped as much as 22.5% or 19.5 sen to RM1.06, giving it a market capitalisation of RM2.8 billion.
Hartalega Holdings Bhd surged 29% or 86 sen to RM3.82, its highest since June 2022, valuing the group at RM13 billion. Kossan Rubber Industries Bhd was up 17.2% or 41 sen to RM2.79, valuing it at RM7.1 billion.
The smaller cap glove counters also got in on the action with Careplus Group Bhd the third most active stock on Bursa Malaysia with 178.3 million shares traded. It jumped to a high of 38 sen, up 25% or 7.5 sen, valuing the company at RM258.6 million.
US president Joe Biden announced yesterday new tariffs on US$18 billion (RM84.6 billion) worth of Chinese imports, including rubber medical and surgical gloves, electric vehicles, batteries, and solar cells to safeguard US industries from perceived unfair competition from China.
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While investors are revelling in higher prices for glove stocks, the euphoria will likely evaporate sooner rather than later. This is because the higher tariff on gloves from China will only kick in two years from now, in 2026.
An analyst who covers the glove sector said today’s price action was likely a “knee-jerk reaction” and overdone.
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Nevertheless, Biden’s announcement is good news for Malaysia’s glove companies which have been pummelled in recent years by Chinese glove makers slashing prices, hurting their margins, profits and share prices in the process.
The tariffs will ultimately increase the cost of Chinese gloves, making Malaysian gloves more attractive to American buyers, and enabling them to regain market share lost to their Chinese counterparts.
RHB Investment Bank said average selling prices for Chinese gloves are set to rise to US$20-US$21.25/1,000 from US$16-US$17 due to the tariff hike, narrowing the price gap with Malaysia-made gloves, which now sell at US$20.
“While the new tariffs are expected to be effective from 2026, this may allow Chinese manufacturers to reconsider their expansion plans into overseas markets to circumvent the tariff hike.
“In our view, overseas expansions could make Chinese glove makers less cost competitive as manufacturers in China use coal, a cheaper fuel compared to natural gas,” said RHB in a note today.
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