Local stock investors may need to avoid glove-related stocks for now as Kenanga Investment Bank Research still maintains an 'underweight' rating on the sector.
This follows expectations that the sector will continue to face a challenging business landscape due to rising costs, weak average selling prices and large capacity leading to low industry utilization rates.
In the latest note issued, Kenanga stated that his views differed from the Malaysian Rubber Glove Manufacturers Association (MARGMA) who saw the industry as changing in 2023.
This is because, its supply demand forecast shows that it will take longer to recover.
It may take at least two years for consistent demand growth to fully cover the current overcapacity in the industry, according to the note.
Even so, in line with MARGMA's projections, the research firm predicts demand for gloves to increase by 15% in 2023.
However, even with the growth, it is seen that it will not help reduce the overcapacity situation which is expected to increase by another 16% this year.
At the time of writing, Top Glove shares rose 5.61% to RM1.13, Kossan rose 2.9% to RM1.42, Supermax Corp added 5.6% to RM1.03 and Hartalega jumped 4.8% to RM2.15.
