Glovemakers extends losses as ringgit strengthens

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KUALA LUMPUR (April 13): Glovemakers extended losses today as the ringgit continued to strengthen against the US dollar.

At 10am today, Top Glove Corporation Bhd fell as much as 10 sen or 1.93% to RM5.07 before paring losses to trade at RM5.11. A total of 327,600 shares were traded.

Supermax Corporation Bhd shed as much as five sen or 1.79% to RM2.74 before paring losses to trade one sen higher at RM2.75. A total of 145,600 shares changed hands.

Hartalega Holdings Bhd dropped as much as nine sen or 1.89% to RM4.68 before paring losses to trade at RM4.71, with 43,700 shares done.

All three stocks were among the top thirty decliners on the local bourse today.

However, Kossan Rubber Industries Bhd appears to have bucked the trend, rising three sen or 0.48% to RM6.25 with 24,400 changing hands, following its general manager Edward Yip's statement yesterday that the company expects to sustain its double-digit growth momentum in financial year 2016 backed by higher capacity utilisation with order overflow from the previous financial year.

In its note on the glove sector last Friday (April 8), UOB Kay Hian noted that the share prices of glove companies have plunged 20% to 34% since the beginning of the year, after the ringgit strengthened to below RM4 to the dollar level.

The research firm, after conducting sensitivity tests on glove makers' earnings on the assumption of steady average selling prices, discovered a possible sector-wide aggregate reduction in industry earnings of up to 26%, with Top Glove being the most impacted stock due to its lower natural hedge on the back of smaller nitrile glove production mix of 32%.

This is lower when compared with Kossan's nitrile glove production mix of 75% to 80% and Hartalega's more than 90%, it added.

However, the research firm said it expected the sentiment towards the gloves sector to be bolstered by some near-term strengthening of the US dollar in the second quarter of 2015, ahead of the expected US Federal Reserve rate hike.

After being pummelled by weak crude oil prices, anticipated interest rate hikes in the US and the political scandal surrounding 1Malaysia Development Bhd last year, the ringgit has made a turnabout from being the worst performing Asian currency last year to being Asia's best performing currency so far this year.

Thomson Reuters data showed that the ringgit had strengthened 10% against the US dollar in January to March this year, its largest quarterly gain since 1973.

In 2015, the ringgit had its worst year since 1997, sliding 18.5% against the greenback.

The ringgit is reportedly being bolstered by a return of foreign investors purchasing Malaysian stocks and bonds on better crude oil prices, a resilient economy and easier monetary policies from major central banks.

The ringgit is currently trading 0.61% higher at 3.8565 against the greenback.