Top Glove shares rebound on US resolution speculation

Top Glove Corp's shares in Kuala Lumpur rose as much as 15 per cent. PHOTO: REUTERS

KUALA LUMPUR (BLOOMBERG) - Shares in world's top glove maker are trying to retrace the losses caused in the wake of a detention order by the US on its products.

Top Glove's shares in Kuala Lumpur surged 16.7 per cent on Friday (July 17) 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 on Friday, climbing $1.03 or 15.9 per cent to close at $7.52.

An eye-popping 375 per cent year-to-date rally in the Malaysia-listed shares - making it the best performing stock 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 customer.

The American action is "unexpected but probably immaterial as the US needs more gloves," said Ross Cameron, a fund manager at Northcape Capital, which overseas about US$7 billion in assets globally. "The other players are all running at full capacity utilization."

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 in a briefing. 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 Sdn, he said.

The issue might be related to foreign labour, Mr Lim said, which the company has worked to resolve over the past few months by paying back recruitment fees to its workers.

"If the issue is indeed with regards 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."

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