Slump in glove shares drags down Malaysian market

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KUALA LUMPUR • Malaysian shares are among the many world’s worst performers this yr, and you may blame all of it on rubber gloves.

A peek underneath the hood of the FTSE Bursa Malaysia KLCI Index’s some 8.6 per cent decline this yr, the third worst amongst key nationwide indexes globally, reveals that just about two-thirds of that was attributable to medical glove exporters – one of many pandemic’s hottest trades only a yr prior.

The fairness gauge is on observe for a 3rd yr of underperformance versus the MSCI Asia Pacific Index, with Top Glove Corp and Hartalega Holdings the most important drags.

Like elsewhere, buyers shunned pandemic winners in Malaysia and embraced reopening performs, inspired by widening vaccine protection and lifting of restrictions on motion.

“Investor focus in the current stage of the pandemic is shifting from gloves to vaccinations,” stated Mr Geoffrey Ng, director at Fortress Capital Asset Management. “The sector is giving up its stellar gains of 2020 and may continue to weigh on the market for a few more quarters.”

The rotation out of final yr’s excessive fliers intensified the headwinds buffeting Malaysia’s markets, from an economic system weakened by lockdowns and a change within the authorities to the uncertainty over the Omicron variant and overseas funds fleeing forward of anticipated fee hikes by the Federal Reserve.

The KLCI Index on Tuesday closed at its lowest degree in 13 months and is heading in the right direction for its worst annual decline because the world monetary disaster.

The 2022 outlook stays tepid amid company earnings dangers attributable to larger taxes and political dangers arising from the chance of bringing ahead a common election that’s due solely in 2023, CGS-CIMB Securities analysts together with Ivy Ng wrote in a be aware this week. The brokerage lower its end-2022 KLCI Index goal to 1,612.

That is a 8.6 per cent achieve from Thursday’s shut as CGS-CIMB expects a restoration in financial progress, additional liquidity at native establishments and low cost valuations to cap the draw back.

As for glove makers, their descent might not be over simply but.

Shares of some Malaysian glove exporters stay underneath strain following allegations of forced-labour practices. Meanwhile, Bellwether Top Glove on Dec 10 reported a 92 per cent stoop in first-quarter earnings amid weaker demand and excessive uncooked materials prices. The inventory noticed a flurry of analyst downgrades quickly after the outcomes and is down about 30 per cent thus far this month.

Last yr, glove shares turned one in every of Asia’s hottest trades on the peak of the pandemic and helped spur a comeback by beginner buyers. At one level final yr, greater than $1 of each $10 invested within the Malaysian inventory market was a wager on gloves.

The sector’s weight in Malaysia’s benchmark index has shrunk to about 4 per cent from greater than 10 per cent final yr, the information confirmed.

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