Malaysian rubber gloves sector to see profit with weak ringgit

Affin Hwang Capital (Affin Hwang), a Malaysian-based investment banking group, has suggested that the weak demand for gloves from Malaysia was because of increased Chinese glove imports into the US, and highlighted a few challenges that has limited local glove manufacturers’ ability to raise their selling price, namely the value perception between latex and nitrile gloves, overcapacity and the time lag in price-setting.

The management of two renowned Malaysian glove manufacturers, Top Glove and Supermax, have commented that the low margin was chiefly due to the sharp increase in latex cost, which they were unable to pass on fully through selling price increases.

However, Affin Hwang believes that pressure to hike latex glove selling prices has since eased, as the latex price has fallen by 13% to MYR437.6 per kg from its peak in 2Q19.

Glove manufacturers have started to increase selling prices to pass on the incremental costs: “Malaysian manufacturers are willing to delay or cut capacity to maintain selling prices,” according to Affin Hwang, who also said that a weak ringgit would benefit rubber glove manufacturers. It estimates that for glove manufacturers under its coverage, every 1% depreciation in the ringgit will result in increased net profit by 0.3-0.8% in 2019.