KUALA LUMPUR (Dec 29): With the roll-out of Covid-19 vaccines gaining momentum worldwide as the year 2020 draws to a close, glove bulls may not be in a party mood.

Most glove makers' share prices have fallen at least one third from their peaks, despite the companies being set to post record earnings.

And the selling pressure persists, with all seven glove makers continuing to dominate the list of top losers on Bursa Malaysia today.

At the closing bell, Hartalega Holdings Bhd lost 52 sen or 4.17% to settle at RM11.94, making it the third top loser on the bourse. Compared with its recent peak of RM20.50 on Aug 3, the stock has slumped 41.76%.

Supermax Corp Bhd was the fifth top loser of the day, after dropping 33 sen or 5.16% to RM6.06. The stock has fallen 49.03% from its recent peak of RM11.89 on Aug 6.

Top Glove Corp Bhd fell 25 sen or 3.99% to RM6.01. The world's largest glove maker's stock has lost 37.4% from a high of RM9.60 on Oct 19. Its market capitalisation now stands at RM49.29 billion, a far cry from its peak of RM78.73 billion.

Kossan Rubber Industries Bhd shed 10 sen or 2.08% to RM4.70 — down 50.99% from the high of RM9.59 seen on Aug 6 — while Comfort Gloves Bhd fell 16 sen or 5.13% to RM2.96, down 56.21% from RM6.76 on Aug 3; Careplus Group Bhd also fell 13 sen or 5.88% to close at RM2.08, down 61.48% from its recent high of RM5.40 on Aug 6.

With only two trading days left to 2020, fund managers and research heads interviewed by theedgemarkets.com said glove counters are unlikely to see a sudden share price recovery.

Fortress Capital Asset Management chief executive officer Thomas Yong said market sentiment has turned bearish on glove stocks since the announcement of vaccine availability, despite the strong earnings performance achieved by the glove companies so far.

“Although the valuations of glove companies have come down significantly from a very high level in the early part of this year, news on the rollout of vaccines will continue to weigh on market sentiment surrounding glove stocks.

“A strong rebound in share price is unlikely, but there might be an opportunity when the valuation of glove stocks gradually normalises to their historical average,” said Yong.

He also said it is widely known in the market that glove companies are going to exceed their highest profit record in 2021 on a full-year basis.

“The question now is not about how much profit they can make in 2021, but how much growth is left. The market is looking past the profit of glove companies in 2021, and its focus is now on any potential reversion in glove average selling price, which might come in as early as the second half of 2021.

“The key question now is when will the balance of demand and supply of gloves be restored, where it is going to trigger a downtrend in glove prices,” he added.  

Rakuten Trade Sdn Bhd head of research Kenny Yee also said the party has ended for the glove sector, as funds will flow to others under the recovery play.

“I would rather be on the sidelines, while the glove counters consolidate,” he said.

Yee also noted that the astronomical earnings for glove companies are temporary, and that glove share prices have already priced in such events.

Sharing the same sentiment was JF Apex research head Lee Chung Cheng, who said the opportunity for glove makers' share price to rebound is getting slimmer as the availability of Covid-19 vaccines spread.

“Even if you see there is a value for glove makers, you will still want to wait for a while. Funds are profit taking, you don’t know how low it can go,” he said, adding that stellar earnings for glove makers have already been priced in.

“Investors are looking forward to the second half of next year, when all the new entrants come in — will the positive momentum be sustained?” he asked.

Likewise, Areca Capital Sdn Bhd CEO Danny Wong think glove makers' share prices are unlikely to return to their peaks, as market sentiment — fuelled by the development of vaccine — is against them.

However, fundamentally, he still likes glove stocks. “If they can achieve their returns, can show some kind of sustainable earnings... I think the glove makers are quite cheap at this moment,” Wong said.

They are also worth looking at in terms of potential dividends or bonus issuance, because of their anticipated bumper earnings next year, he added.