Malaysia Gloves Sector
Christmas comes earlier
Aboost to Malaysia glove makers competitiveness
We are pleasantly surprised by US' final USTR modifications on China
tariffs, which will raise tariffs on China-made medical and surgicat gloves
to 50% by 2025 and 100% by 2026 - well above the 25% proposed in May
2024. This increase will make Malaysia gloves relatively cheaper, boosting
their competitiveness in the US market. We maintain tactical POSITIVE on
the glove sector and expect earnings recovery in the next 12-15 months,
before additional capacity from China's overseas expansion picks up in
2026. Our top BUYs are HART and KRI. We U/G TOPG to a tactical BUY.



An unexpected positive development

We expect this latest development to make Malaysia gloves more
attractive in the US market. This market has been important for Malaysia
glove makers (TOPG: 15% of sales, HART: 50%), which have been losing market share to their Chinese counterparts since 2021 due to intense price
competition. While there is a risk that China glove makers may shift their
focus to the European market (TOPG: 35% of sales, HART: 25%), we believe Malaysia glove makers could offset the loss of their market share in Europe
with stronger sales in the US.