Glovemakers among Bursa top decliners as ringgit strengthens

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KUALA LUMPUR (March 11): Shares of rubber glove manufacturers Hartalega Holdings Bhd, Top Glove Corp Bhd, and Kossan Rubber Industries Bhd fell among Bursa Malaysia's top decliners as the ringgit strengthened.

At 10:34am, Hartalega shares fell 17 sen or 3.41% to RM4.82, Top Glove dropped 11 sen or 2.4% to RM4.48 while Kossan declined five sen or 1.32% to RM3.73.

In the currency markets, the ringgit strengthened to 4.0875 against the US dollar at 10:22am. The exchange rates so far today moved between 4.0850 and 4.0910.

Year to date, the ringgit has strengthened 1.12% at current levels after depreciating to its weakest point at 4.1453.

Meanwhile, Kenanga Research has maintained its "underperform" rating on Top Glove, but with a lower target price of RM4.20 (from RM4.45 previously), citing strong demand for gloves is tapering off coupled with competitive pressure and players ramping up production that could result in further average selling price (ASP) compression, which are prompting the research house to cut its FY19E/20E forecasts by 5%/4%.

In a note today, Kenanga Research said it expects Top Glove to report a lower set of core profit after tax and minority interests (PATAMI) in the second quarter ending Feb 28, 2019 (2QFY19) mainly due to three reasons: the normalising demand as delivery lead times have shortened, competitive pressure, and margins pressure emanating from the appreciation of ringgit against the greenback.

"We downgrade our FY19E/FY20E net profits by 5%/4% to take into account the lower-than-expected ASPs," it added.