Hong Leong Investment Bank Bhd (HLIB) maintained its NEUTRAL call on the glove sector, keeping HOLD ratings on Top Glove Corporation Bhd, Hartalega Holdings Bhd and Kossan Rubber Industries Bhd, as concerns over structural oversupply return following the reopening of the Strait of Hormuz.
HLIB said glove stocks outperformed the FBM KLCI in the first half of 2026, with Top Glove gaining 6.2%, Hartalega rising 1.4%, and Kossan declining 3.6%. The stronger performance was driven by expectations of improving earnings, supported by higher average selling prices that offset rising raw material costs.
However, sentiment shifted after the US-Iran peace memorandum reopened the Strait of Hormuz, reducing concerns over nitrile butadiene rubber supply disruptions while bringing industry oversupply issues back into focus.
The research house said supply risks remain a key challenge, particularly due to aggressive capacity expansion by Intco Medical Technology, China’s largest glove manufacturer. Intco’s installed capacity increased to 103 billion pieces in 2025 from 87 billion pieces in 2024, with further expansion expected in 2026 and beyond.
HLIB said this expansion strategy could keep global utilisation rates below the 85% equilibrium level, limiting average selling prices and putting pressure on regional manufacturers’ margins.
In contrast, Malaysian glove producers and Sri Trang Gloves have maintained more disciplined expansion plans, with capital expenditure generally below depreciation and amortisation levels.
HLIB said recent glove share price corrections and ongoing geopolitical uncertainty have partly balanced the oversupply risks, but maintained that the sector’s risk-reward profile remains balanced.
