More glove-maker stocks may join Malaysia's benchmark index amid Covid-19 rally

Supermax, Kossan Rubber may supplant Genting on KLCI to join rivals Top Glove, Hartalega

Published Fri, Oct 16, 2020 · 09:50 PM

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 in November or December, said 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, given the boom in demand for gloves during the novel coronavirus pandemic, sending their shares to dizzying heights. Supermax has soared more than

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

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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$24.87 billion), Top Glove is close to overtaking Malayan Banking as the biggest stock on the KLCI Index.

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, said the two analysts.

"For every 100 dollars coming to the KLCI Index, about 20 dollars are going to go into glove makers after the review," said Brian Freitas, an analyst at Smartkarma.

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 in the states of Selangor and Sabah, as the country battles a spike in Covid-19 cases. The nation reported 589 new cases on Thursday.

Surging demand has spurred other companies to dive into the glove business. Mah Sing Group, one of Malaysia's biggest developers, said on Thursday that it plans to acquire 12 new glove production lines to reduce its dependence on its property business, which has been hit by the pandemic.

The stock soared as much as 34 per cent on Friday and prompted multiple analyst upgrades on the company's shares.

Meantime, Genting and its units have started to cut pay and workforce due the pandemic. Its 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; Kossan's has climbed to more than RM20 billion, shows Bloomberg-compiled data.

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. BLOOMBERG


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