Top Glove shares rebound on talk of resolution in US
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Malaysian company Top Glove derives 25 per cent of its sales and orders from the United States. The stock lost 18 per cent in the three sessions through Thursday amid regulatory action in the US which, the company said, might be related to foreign labour.
PHOTO: REUTERS
KUALA LUMPUR • Shares in the world's top glove maker are trying to retrace the losses caused in the wake of a detention order by the United States on its products.
Top Glove Corp's shares in Kuala Lumpur rose as much as 15 per cent yesterday after slumping by almost 10 per cent in the previous session for their steepest drop in a month.
Some investors are speculating that the company will be able to address the concerns raised by the US as demand for gloves remains elevated due to the still-widening coronavirus pandemic.
Its Singapore-listed shares also rallied as much as 15 per cent to $7.48 at one point.
An eye-popping 375 per cent year-to-date rally in the Malaysian-listed stock - making it the best performing across Asia's and emerging markets' main gauges this year - is showing some signs of cooling off.
The stock lost 18 per cent in the three sessions through Thursday amid the regulatory action in the US, one of its biggest customers.
The American action is "unexpected but probably immaterial as the US needs more gloves", said Mr Ross Cameron, a fund manager at Northcape Capital, which overseas about US$7 billion (S$9.7 billion) in assets globally.
"The other players are all running at full capacity utilisation."
Top Glove, which derives 25 per cent of its sales and orders from the US, is reaching out to US Customs to understand the issue better and to resolve the matter within two weeks, executive chairman Lim Wee Chai said.
The affected units account for 12.5 per cent of total revenue, and the company can still ship to the US through other units including Aspion, he said.
The issue might be related to foreign labour, Mr Lim said, which the firm has worked to resolve over the past few months by paying back recruitment fees to its workers.
If the issue is indeed over "the pending reimbursement to its workers, we expect a resolution to come through sooner rather than later", Citigroup analyst Megat Fais wrote in a note on Thursday.
"A prolonged ban on paper would be catastrophic but unlikely in our view, especially as the Covid-19 situation in the US remains challenging," he added in the note.
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