Are pharma counters playing catch up with glove stocks?

Bursa’s Healthcare Index was up by more than 7% as at 4pm yesterday

by SHAZNI ONG/ pic by BLOOMBERG

THE price rally in glove manufacturing stocks is catching on to pharmaceutical counters as investors react favourably to news of a potential vaccine found for the Covid-19 pandemic.

Investors bought into Pharmaniaga Bhd, Duopharma Biotech Bhd, Apex Healthcare Bhd and Kotra Industries Bhd yesterday with all the counters witnessing their shares surged by a third.

Pharmaniaga closed 30% or RM1.05 higher at RM4.55, while Duopharma ended 29.82% or 68 sen higher at RM2.96. Shares of Apex jumped 29.74% or 91 sen to RM3.97 while Kotra Industries’ up 29.82% or 82 sen to finish the day at RM3.57.

Despite the spike of pharma stocks in share price, the FTSE Bursa Malaysia KLCI closed 0.56% or 8.95 points lower to 1,586.98 points, dragged by the big four glove and consumer products counters such as Panasonic Manufacturing Malaysia Bhd and Dutch Lady Milk Industries Bhd.

“The rally in pharmaceutical counters is driven by hope for a Covid-19 vaccine developed by AstraZeneca plc and the University of Oxford which was deemed safe and could produce an immune response in early-stage clinical trials.

“As such, the Bursa Malaysia’s Healthcare Index was up by more than 7% as at 4pm yesterday propelled by Pharmaniaga, Apex and Kotra Industries which all hit a record high,” Bank Islam Malaysia Bhd economist Adam Mohamed Rahim told The Malaysian Reserve yesterday.

Adam observed gains in glovemakers as losing steam amid the news of a vaccine.

The lesser decline in the nation’s inflation rate signals a gradual path of recovery and potential production of vaccines in the future would spell increased interest in stocks related to the overall economy namely, the banking sector, he added.

MIDF Amanah Investment Bank Bhd senior analyst Imran Yassin Mohd Yusof observed a slight pullback from glove counters, possibly due to the positive development of the vaccine and on some profit-taking activities.

“We believe it is rather muted and does not constitute a sell off. It is more of investors taking a breather, in line with regional peers, rather than anything else,” he said.

The rise in pharma counters is due partly to a statement from the government recently on setting up vaccine manufacturing capability in the country (not just for the Covid-19 vaccine).

“Pharma counters — especially Pharmaniaga and Duopharma — are expected to be a key beneficiary from this. Hence, the recent excitement on pharma counters,” Imran Yassin told TMR.

The rally in pharma counters helped day volume to hit 9.37 billion units valued at RM4.89 billion.

“A key event will be the ending of the loan moratorium period which we expect could see volume decreasing. However, it is too early to call for a tipping point,” Imran Yassin added.

Malacca Securities Sdn Bhd said longterm investors could also capitalise on the recovery in the financial sector as financial institutions might not be as badly impacted at the end of loan moratorium, while energy stocks will also be favourable after crude oil prices jumped to the highest level since March 2020.

“Financial institutions in Malaysia have declared that extension of loan moratorium is off the table, with options for repayment to targeted groups; suggests the potential spike in non-performing loans in the final quarter of the year will be contained and the nation is on track for recovery.

“Further stimulus from central banks across the European Union and Japan, and positive developments vaccine for Covid-19 may further contribute to the positive sentiment,” the firm said in a note yesterday.