Glove stocks under pressure from vaccine rollout

World’s vaccination programme would reduce demand for gloves and further stifle the glove rally, says economist


GLOVE stocks extended their decline on signs that progress in the distribution of Covid-19 vaccines in Malaysia is bolstering hopes of a swift post-pandemic recovery.

The attempt by retailers to combat selling pressure from institutional short selling on Top Glove Corp Bhd shares was short-lived, but effective enough to lower or stop fresh short positions in the counter based on data from the exchange so far.

“The retailers can’t support a sustained push higher because the volume of Top Glove shares is very high. The shorts also can’t really do much because major institutional holders in Top Glove, like the Employees Provident Fund (EPF), don’t really lend out their shares for such activity,” an executive handling securities borrowing and lending activity at a local brokerage told The Malaysian Reserve (TMR).

Sustained selling of Top Glove shares by the EPF and likely by proprietary traders has seen the stock price trending lower, with some traders also capitalising from the difference in price between the mother share and Top Glove American Depository Receipts.

The pressure on Top Glove shares has impacted the sentiment for the other glovemakers as well.

The four major glovemakers have seen about RM14 billion wiped out from their valuation since Feb 2, and after the BursaBets movement transpired on Jan 29, dragged further by expectations the country would receive its first batch of vaccines later this month.

Bank Islam Malaysia Bhd economist Adam Mohamed Rahim said the country and world’s vaccination programme would reduce demand for gloves and further stifle the glove rally experienced last year amid rising concerns on the Covid-19 pandemic.

“The optimism of a vaccine roll-out will reduce the sentiment for glove stocks as the vaccination programme could reduce demand for gloves although these items will still be needed in a post-pandemic world,” he told TMR recently.

Top local glovemakers have seen their share price dropping over the past week after it was announced that the country is expecting the first batch of vaccines to arrive by the end of this month.

Selling pressure on Top Glove shares has resumed since the Bursa-Bets-driven buying transpired and despite sustained buying from its directors and top executives last week.

Its share price slipped five sen or 0.81% yesterday to close at a near three-week low of RM6.15, valuing the company at RM50.44 billion. The world’s largest glovemaker has lost some RM7.3 billion in market capitalisation since Feb 2.

The company’s share price reached an intraday high of RM7.08 on Jan 29, following an initiative by retail investors to shore up the prices of glove stocks to combat the short sell done by institutional investors.

The local subreddit, dubbed as BursaBets, inspired by WallStreet-Bets in the US, which fuelled the rally on video game retailer GameStop Corp.

“The BursaBets initiative aimed at shoring prices up for glove stocks has somewhat failed. Recall that retail investors last week piled into Top Glove’s shares on Tuesday, which pushed the share price up to end 4.6% higher that day.

“Retail investors, however, were unable to sustain the buying momentum for Top Glove, which led to a 6.2% drop between last Wednesday and Friday,” he said.

Supermax Corp Bhd also saw a decline in its share price, ending two sen or 0.32% lower at RM6.18 yesterday, valuing the company at RM16.81 billion.

Kossan Rubber Industries Bhd’s share price, however, was up by one sen or 0.25% to close at RM4.05 yesterday, with a market value of RM10.36 billion.

The first batch of vaccine that Malaysia will receive is from Pfizer Inc and BioNTech SE, which is expected to be given out until April involving the vaccination of 500,000 frontliners consisting of medical and non-medical personnel.

Malaysia will also acquire vaccines from UK’s AstraZeneca plc, Russia’s Gamaleya National Centre, as well as China’s Sinovac Biotech Ltd and CanSino Biologics Inc.

Read our previous report here

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