KUALA LUMPUR – Top Glove Corp Bhd shares dropped to a 10-month low of RM4.51 this morning on the back of news on greater sanctions by the United States on the glovemaker’s products over alleged indentured and forced labour, effectively barring group-wide exports.
RM5.26 billion in market capitalisation was wiped off from the group due to selling pressure this week as the stock price dropped to the lowest level since May last year.
At 10.40am, Top Glove was trading at RM4.52, down 26 sen, or 5.44%. It dipped to a low of RM4.50 shortly after the opening bell.
It is the third time the manufacturer has sunk below RM5 since the glove frenzy started last year due to the Covid-19 pandemic.
US Customs and Border Protection (CBP) on Monday issued a directive to its personnel at all US ports of entry to begin seizing disposable gloves produced in Malaysia by Top Glove over alleged forced labour.
AmInvestment Bank Research, in a note yesterday, said sales to the US provided roughly 25% of Top Glove’s total in the financial year 2019, and the average selling price in the US is estimated to be at a 5% premium compared with that of other countries.
“While glove demand is projected to remain elevated in the next few years, it is unlikely that the company will find viable substitutes for the entire US customer base. This will affect the group’s earnings as glove urgency begins to normalise.”
This provides an opportunity for local peers, as well as Chinese players like Blue Sail Medical and Intco Medical, to get additional bargaining power, it said.
Commenting on the forced labour issue, Top Glove, in a bourse filing yesterday, said it is unable to ascertain the quantum of the financial and operational impact arising from CBP’s move.
The company said its US lawyers are liaising with CBP representatives to obtain more clarity and information on the latest order.
Selling pressure is also mounting on its peers Supermax Corp Bhd and Hartalega Holdings Bhd since the opening bell today.
Supermax slipped as much as 12 sen, or 3.04%, to RM3.83 before settling at RM3.88.
Hartalega, the second top loser this morning, slumped as much as 37 sen, or 3.95%, to RM8.99 before settling at RM9.01.
Market participants told The Vibes that the forced labour issue is among the reasons for the selling pressure, and bargain-hunting may be a theme when selling stops. – The Vibes, March 31, 2021
