Amid geopolitical reshuffling, the US’ reciprocal tariffs, and intensifying China competitions, the Malaysian glove sector rode through a volatile 1H25.
Despite the year-to-date steep share price correction reflecting mixed investor sentiments, we opine that risk-reward remains attractive given the sector’s bargain forward valuations (-2 standard deviation below mean).
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European Commission restricts Chinese firms from public medical tenders.
Last Friday, the conclusions of the first investigation under the International Procurement Instrument (IPI) were announced. The European Commission will exclude Chinese companies from participating in public procurement contracts exceeding €5m and impose a 50% cap on medical devices imported from China.
Nevertheless, we understand that despite surgical gloves possibly being grouped under CPV 33141420-0 (surgical packs) tenders covered by the IPI measure, other disposable medical gloves are typically grouped under the broader category of PPE (CPV 33700000-7) which is not covered. Hence, we assess that net incremental Europe orders flowing to Malaysia will be modest at potentially 1b-2b pieces annually.
Shifting trends between the US and Europe markets continue.
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That said, on a net basis, Malaysian glovemakers’ should see improved profitability and margin from this shift.
Fragile sentiment and melancholic selldown have potentially priced in most negatives.
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Above is an excerpt from a report by UOB Kay Hian Research. Clients of UOB Kay Hian may be the first to access the full PDF report @ https://www.utrade.com.sg/.
