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Glove plays in sell-off after bullish run; Top Glove gets US detention order
THE shares of glove makers saw sharp sell-offs on the Singapore bourse this week, after a meteoric rise over the past six months thanks to a boost in demand for gloves amid the Covid-19 pandemic.
On Wednesday, the US Customs issued a detention order on imports made by the world's largest glove manufacturer, Top Glove, which is dual-listed in Singapore and Malaysia, possibly over forced labour concerns.
Earlier this week, the trio of rubber glove plays - Top Glove, UG Healthcare and Riverstone Holdings - all registered price falls, albeit to varying degrees.
One broker The Business Times (BT) spoke to on Thursday noted a "very fierce trading pattern" among the glove counters. "A lot of optimism was priced in, prices ran up well ahead of valuations and subsequently corrected down," he said.
UG Healthcare plunged to S$1.59 as at 2pm on Monday, before closing at S$1.76, down S$0.21 or 10.7 per cent. Riverstone shed 6.6 per cent or S$0.22 to finish S$3.10 on Tuesday, with the counter diving further to S$2.97 as at 9.30am on Wednesday. Likewise, Top Glove dropped to S$7.05 as at 4.30pm on Tuesday, before ending at S$7.54, down S$0.27 or 3.5 per cent.
On Thursday, shares of UG Healthcare plummeted 14.3 per cent or S$0.22 to S$1.32 by the closing bell, while shares in Riverstone sank 2.3 per cent or S$0.07 to S$3.
Top Glove nose-dived 11.1 per cent or S$0.81 to S$6.49. The company has requested to lift a trading halt it called for earlier in the day, following a clarification regarding the US Customs and Border Protection (CBP) order.
In a regulatory filing on Thursday afternoon, Top Glove disclosed that the CBP has placed a detention order on disposable gloves manufactured by two of its subsidiaries - Top Glove Sdn Bhd and TG Medical Sdn Bhd. Such a move is intended to stop imports from companies suspected of using forced labour, Reuters reported.
Top Glove said it is reaching out to the CBP through its office in the US, as well as customers and consultants to better understand the situation and work towards a "speedy resolution" within an estimated two weeks. "There is a possibility this may be related to foreign labour issues which we have already resolved, save for one more issue with regard to retrospective payment of recruitment fees by our workers to agents prior to January 2019, without our knowledge," Top Glove said.
The company added that it has been bearing all recruitment fees since January last year when its zero recruitment fee policy was implemented. "Over the past few months, we have been working on this issue which involves extensive tracing to establish the correct amount to be paid back to our workers, on behalf of the previous agents." Top Glove now estimates this amount to be about RM20 million (S$6.5 million) to RM50 million.
UG Healthcare is on track for a weekly loss, having tumbled 33 per cent so far this week, while Riverstone has fallen 8 per cent from July 13 to 16, Shareinvestor data shows. They were up 48.1 per cent and 17.7 per cent respectively last week from July 6 to 9. Meanwhile, Top Glove registered a weekly loss of 5.7 per cent as at Thursday, after advancing 14.7 per cent last week.
Over the past six months, UG Healthcare has gained almost 800 per cent, Top Glove has risen some 366 per cent, and Riverstone has climbed over 220 per cent, according to Bloomberg data.
CGS-CIMB analyst Ong Khang Chuen told BT that the share price correction on the glove sector which began early this week, was triggered with several local brokers imposing trading restrictions on selected medical supplier counters, given high credit exposure to the sector. Sentiment was later also likely affected by positive updates on Covid-19 vaccines, and Top Glove's subsidiaries being placed on the US Customs' detention list, said Mr Ong.
Nonetheless, CGS-CIMB remains positive on the sector, as it still sees a shortage in glove supply and expects average selling prices to remain high, amid an uptick in daily Covid-19 cases worldwide.
Separately, when asked about possible reasons for the recent share price movements, the broker whom BT spoke to noted that the price falls come as market euphoria slows down. He added that algorithmic trading could be a contributing factor, though "there is no way to attribute to it convincingly". "There are various algorithmic traders in the market currently based on market feedback. They tend to trade the liquid stocks actively, and can add to the price swings," he added. Looking ahead, the broker noted that the shares of these glove plays should see more rational trading, with prices stabilising and finding some support.
Across the Causeway, seven glove stocks on Bursa Malaysia had displayed a uniform V-shape pattern on Tuesday, with the counters crashing shortly after 4pm, before rebounding before the closing bell, The Edge reported. The sudden plunge among the stocks during the final trading hours was in the range of 15-25 per cent, sparking intrigue among market observers. On the Malaysia bourse, Top Glove was one of the top decliners on Thursday, slipping 9.6 per cent to RM19.70 when it resumed trading at 3.30pm. Trading across Bursa Malaysia was halted shortly after due to a technical issue.
Additional reporting by Uma Devi