More glove makers may join Malaysia's benchmark index

Supermax and Kossan could replace Genting and one of its units on KLCI

A worker inspecting gloves at Top Glove's factory in Setia Alam, Selangor. Valued at nearly $25 billion, Top Glove is close to overtaking Malayan Banking as the biggest stock on the FTSE Bursa Malaysia KLCI Index, and fellow glove maker Hartalega is
A worker inspecting gloves at Top Glove's factory in Setia Alam, Selangor. Valued at nearly $25 billion, Top Glove is close to overtaking Malayan Banking as the biggest stock on the FTSE Bursa Malaysia KLCI Index, and fellow glove maker Hartalega is in third position. PHOTO: EPA-EFE

KUALA LUMPUR • Malaysian glove makers are threatening to supplant the once-mighty gaming companies in the nation's benchmark equity index, thanks to the spectacular rally in their shares.

Supermax and Kossan Rubber Industries may join bigger rivals Top Glove and Hartalega Holdings in the 30-stock FTSE Bursa Malaysia KLCI Index after a review of the gauge's members next month or in December, according to analysts at Maybank Investment Bank and Smartkarma.

The two stocks are expected to replace casino giant Genting and its unit Genting Malaysia.

The likely entrants are already worth more than some of the gauge's members by market value after the boom in glove demand during the coronavirus pandemic sent their shares to dizzying heights.

Supermax has soared more than 1,400 per cent this year, while Kossan's stock has more than tripled.

The makeover of the South-east Asian benchmark from one traditionally led by banks, utilities and gaming underscores huge investor demand for companies making hygiene products.

Valued at RM76 billion (S$24.85 billion), Top Glove is close to overtaking Malayan Banking as the biggest stock on the KLCI Index, and Hartalega is in third position.

With the new additions, glove makers' weighting in the gauge will jump to about 20 per cent from around 15 per cent at present, according to the analysts.

"For every $100 coming to the KLCI Index, about $20 is going to go into glove makers after the review," Smartkarma analyst Brian Freitas from New Zealand said in a phone interview. While the additions are happening after the sharp rally, there is still a lot of visibility on demand for gloves, he said.

Malaysia this week imposed restrictions on movement in its capital city of Kuala Lumpur, administrative capital Putrajaya and the states of Selangor and Sabah as the country battles a spike in virus cases. The nation reported 589 new cases on Thursday.

Surging demand for gloves has spurred other companies to dive into the business. Mah Sing Group, one of Malaysia's biggest developers, said on Thursday that it plans to acquire 12 new production lines to reduce dependence on its property business, which has been affected by the pandemic. The stock soared as much as 34 per cent yesterday and prompted multiple analyst upgrades on the company's shares.

Meanwhile, Genting and its units have started to make workforce and pay cuts, owing to the pandemic. Genting's market value has shrunk to RM11.7 billion from more than RM40 billion almost a decade ago.

In contrast, Supermax's market value has surged to RM27 billion this year, while Kossan's has climbed to more than RM20 billion, Bloomberg-compiled data shows.

The constituent changes will be implemented after the end of trading on Dec 18, and will be effective Dec 21, Maybank's head of research Wong Chew Hann wrote in a note this month.

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A version of this article appeared in the print edition of The Straits Times on October 17, 2020, with the headline 'More glove makers may join Malaysia's benchmark index'. Print Edition | Subscribe