KUALA LUMPUR (Feb 11): The recent spike in the ringgit's volatility may put pressure on rubber glove manufacturers' profit margins, as they may not be able to revise their pricing significantly over a short period, Affin Hwang Investment Bank Bhd said today.

Nevertheless, Affin Hwang analyst Ng Chi Hoong said the research firm believes the problem is short-term in nature.

"We are not too concerned over the strengthening of RM against USD, as we have assumed an exchange rate of RM3.9/USD by end of 2019. Moreover, we believe that manufacturers are able to pass on the rising production cost to customers within a reasonable period (2-4 weeks).

"Although the rubber products sector was one of the best performing sectors in Malaysia for 2018, share prices have corrected by -11.5% since the start of the year and underperforming the FBMKLCI's return of +0.2%, due to renewed concerns over potential supply overcapacity and the recent strengthening of the RM. While we still maintain our Overweight call on the sector, there could be downside risk to our thesis, depending on the outcome of China’s environmental policy," Ng wrote in a note.

In currency markets today, the ringgit was traded at 4.0695 against the US dollar at 10:32am. Over the last one year, the ringgit has strengthened to current levels, after depreciating to its weakest point against the US dollar at 4.2020.