US tariffs on China to lend a hand to Malaysia’s glove makers

The tariffs are expected to revitalise investor sentiment and reclaim market share, with analysts predicting a return to profitability for the sector

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A worker inspects disposable gloves at the Top Glove factory on the outskirts of Kuala Lumpur in August 2020. Photo: AFP

Published: 4:15pm, 17 Sep 2024

Malaysia glove maker shares including Top Glove Corp. surged after the US was expected to finalise tariffs on Chinese goods this month.

Top Glove jumped as much as 32 per cent, the most ever, while Hartalega Holdings Bhd rallied by the 30 per cent limit. The gains come a day after Thailand peers spiked, as analysts point out that Southeast Asian producers will be the main beneficiaries. Malaysia’s market was closed for a holiday on Monday.

Tariffs on billions of dollars in Chinese goods, including medical products, are being finalised by President Joe Biden’s administration following a proposal to raise levies in May, an official said late last week. The new tariffs are higher and will be implemented more quickly than expected, according to Citigroup Inc.

US tariffs on Chinese medical gloves will rise to 50 per cent in 2025 and 100 per cent in 2026, Citi analysts wrote in a report. That’s up from a 25 per cent hike proposed in May, which was to take effect in 2026.

The tariffs are “poised to revitalise investors’ sentiment on the Malaysian glove sector,” Jack Goh, an analyst at UOB Kay Hian Pte., wrote in a report. “With the sector’s post-pandemic recovery eclipsing earnings amid demand moderation, domestic glove makers should progressively reclaim market share from China.”

US tariffs on Chinese medical gloves are set to boost Malaysian glove makers, with shares of Top Glove and Hartalega surging as investors anticipate increased demand. Photo: Bloomberg

The impending levy provides yet another fillip for Southeast Asian equities, which are already bolstered by growing bets the region will be a beneficiary from a Federal Reserve interest-rate pivot. Four of the five best-performing Asian stock benchmarks this month are from the region, with inflows in September poised for the highest level since April 2022.