Selling wave sweeps across glove makers amid tightened margin financing

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KUALA LUMPUR (June 3): The heavy selling of glove counters continued for a second day with their share prices falling over 10% in early trade today as profit taking extended amid tightened margin financing by brokerage houses announced yesterday.

As at the time of writing, shares in FBM KLCI constituent Top Glove Corp Bhd had fallen by as much as RM1.50 or 10.13% to RM13.30, while Hartalega Holdings Bhd had declined by as much RM1.32 or 10.36% to RM11.42.

Share prices of other glove makers also retreated, with Supermax Corp Bhd falling 81 sen or 10.64% to RM6.80. Meanwhile, Kossan Rubber Industries Bhd shares were down by 75 sen or 8.52% to RM8.05.

Other smaller players saw an even steeper sell-off, including HLT Global Bhd (down 11.9%), Comfort Gloves Bhd (down 12%) and Rubberex Corp (M) Bhd (down 17%).

Bursa Malaysia's healthcare index retreated 3.57%.

The sell-off continued from yesterday, when brokerage houses Maybank Investment Bank Bhd and RHB Investment Bank Bhd imposed caps on margin financing of six rubber glove counters at lower valuations compared to their share prices at the time. 

Maybank’s valuation of Hartalega was capped at RM8.97, followed by Top Glove at RM9.41, Kossan at RM7.87, Supermax at RM3.38 and Comfort Gloves at RM2.29.

RHB, meanwhile, capped the financing limit at a 35% discount on the latest market closing price of Hartalega (or at a 35% discount on RM8.15, whichever is lower), followed by Top Glove (or on RM8.64), Kossan (or on RM5.65), Supermax (or on RM5), Rubberex (or on RM2.31) and Comfort Gloves (or on RM2.35).

Just a day before the announcements by the brokerage houses, price-earnings valuations of Hartalega, Top Glove and Rubberex breached the 100 times mark, rarely seen among manufacturing-oriented companies.

While valuations have reached astronomical levels, certain research houses still expect glove makers, currently one of few bright spots in the local equity market due to their position as beneficiaries of the Covid-19 pandemic, to continue their rally over the next six to 12 months alongside other healthcare stocks.