Written by Loong Tse Min
Thursday, 26 August 2010 15:29
KUALA LUMPUR: Malaysian-listed latex glovemakers’ shares continued to slide yesterday as investors’ concerns on the industry’s prospects appear to intensify this week.
Most glovemakers have been falling so far this week with the world’s second-largest latex glovemaker Supermax Corp Bhd losing about 8% over three trading days to end at RM5.07 yesterday.
Over the last three trading days, Hartalega Holdings Bhd lost 31 sen or 3.9% to close at RM7.63 yesterday, Kossan Rubber Industries Bhd fell 23 sen or 6.35% to RM3.39, Latexx Partners Bhd was down 26 sen or 7.71% to RM3.11, Adventa Bhd shed eight sen or 3.03% to RM2.56 and Rubberex Corp (M) Bhd was down 5.5 sen or 5.73% to 90.5 sen.
The world’s largest latex glovemaker Top Glove Corp Bhd put on 11 sen or 1.8% to RM6.16 over Monday and Tuesday but fell 10 sen or 1.62% to RM6.06 yesterday.
The long list of concerns over the industry was raised about a month ago, which was also highlighted by The Edge Financial Daily.
These include potential overcapacity, record-high latex prices, the appreciation of the ringgit, a potential cut in Malaysian gas subsidies and possibly slower demand ahead due to the economic slowdown and easing H1N1 influenza fears.
The latest developments that seem to support these concerns include the ringgit’s further strengthening, more signs of a slowing US economy and continued high rubber prices.
Following Bank Negara Malaysia’s foreign exchange liberalisation moves, the ringgit reached it highest levels in 13 years at RM3.1320 on Monday. In the US, the deluge of bad economic data continued. On Monday, investors were spooked by data showing that existing home sales for July plunged a record 27%.
Meanwhile, rubber prices continue to hold firm, despite the recent fall in the price of palm oil and other commodities. Standard Malaysian Rubber general purpose FOB current month was priced at RM9.84 per kg yesterday, the highest since May 5.
Among glovemakers, Supermax fell the most yesterday, down 16 sen or 3.06% to RM5.07, as CIMB Research warned yesterday that the company may report a quarter-on-quarter (q-o-q) earnings contraction for its second fiscal quarter. The company is expected to release its results today.
However CIMB Research, which has a buy call on Supermax, defended the stock saying, “We are not worried about the potential q-o-q earnings contraction as this is not the first time glove manufacturers are facing this situation. From our checks, demand for rubber gloves remains healthy and Supermax continues to operate at almost 90% utilisation, supporting our view of sufficient pricing power that will allow glovemakers to pass on any cost increases.”
At the same time, some institutional buyers appear to be nibbling in glovemaker stocks at their current low prices.
This article appeared in The Edge Financial Daily, August 26 2010.
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