Glovemakers' shares inflate

Share prices of rubber glovemakers shot up yesterday as investors foresee higher global demand for medical gloves after a two-week decline in rubber prices.

Following Japan's devastating 9-magnitude earthquake and tsunami last Friday, rubber futures on the Tokyo Commodity Exchange nosedived in anticipation of production halt among car and tyremakers.
Yesterday, the benchmark rubber contract on the Tokyo Commodity Exchange for August delivery fell more than 15 per cent, or 31.1 yen, to settle at 353 yen per kg (100 yen = RM3.75).
CIMB Investment Bank analyst Ivy Ng said demand for rubber could be hit in the near term due to the physical lack of access and potential disruption to tyre and car manufacturing plants in Japan.
"Also, potential buyers could stay on the sidelines hoping to snap up these commodities at lower prices due to short-term uncertainty in the market," she added.

 

Japan's rubber futures had plunged more than a third from a record 528.4 yen reached a month ago on February 17, following worsening Middle East tensions and slowing car sales in China, the world's largest rubber consumer.
Just last month, China's voracious demand for cars eased as surging petrol prices, the end of government subsidies and a major holiday took a toll on the world's biggest car market.
Taking the cue from Japan's rubber price plunge, Malaysian Rubber Board yesterday reported that tyre-grade SMR 20 tumbled 49.5 sen to RM11.89 per kg while latex-in-bulk fell 45.5 sen to RM8.61 per kg.
Kenanga Research foresees natural latex prices dropping further from an all-time high of RM10.90 per kg two weeks ago.
In its update to investors titled "Better Days Ahead?", the research house had a "neutral" outlook on the rubber glove sector and placed "buy" calls on Kossan Rubber Industries Bhd and Hartalega Holdings Bhd.
It said concerns over weak US dollar and costly natural latex prices had been overly exaggerated.
Glovemakers are in for good news should natural latex prices drop further to RM8 per kg, Kenanga Research added.
When contacted, Top Glove Corp Bhd executive director Lim Cheong Guan said the recent price plunge in natural latex had spurred demand for its rubber gloves.
"Demand has started to pick up again, our clients' inventory holdings are begining to normalise."
Yesterday, all rubber glovemakers' share prices shot up except for Hartalega, which fell 10 sen to RM5.50.
In a telephone interview, Hartalega managing director Kuan Kam Hon said investors may have been unduly worried by synthetic latex supply disruption from Japan.
"I would like to go on the record that we're receiving steady supply of nitrile latex from our suppliers in Japan. Their factories are in Kawasaki, far away from the area hit by the earthquake and tsunami.
"Our suppliers have also reassured us that there's enough buffer stocks in the months ahead at their Port Klang facility," Kuan added.
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