RHB Research has maintained its UNDERWEIGHT rating on Malaysia’s glove sector despite stronger-than-expected second-quarter earnings and anticipated selling price increases in October, citing persistent industry overcapacity and continued pricing pressure from Chinese manufacturers.
The research house said the sector’s June reporting quarter exceeded expectations largely because Malaysian glove producers raised average selling prices (ASPs) to cushion higher raw material costs following a spike in nitrile butadiene latex prices amid the US-Iran conflict.
However, it stressed that the earnings improvement was driven by cost-related price adjustments rather than stronger underlying demand.
“China producers still set prices and the industry still has too much capacity,” RHB said, adding that these structural challenges continue to weigh on the sector’s longer-term outlook.
RHB said Supermax Corporation, Top Glove Corporation and Kossan Rubber Industries delivered better-than-expected earnings, despite the research house having already revised its forecasts upwards ahead of the results season.
One notable development was the narrowing of operating margin differences among glove producers.
Earnings before interest and tax (EBIT) margins, which ranged from negative 32% to positive 10% in the first quarter of 2026, converged within a range of 12.9% to 14.9% in the second quarter.
This excludes Riverstone Holdings, whose higher-value cleanroom glove product mix supports structurally stronger margins.
RHB said generic nitrile glove ASPs had fallen to US$19–US$20 per 1,000 pieces in September from a peak of US$27–US$28 in May.
However, its industry checks indicate that Malaysian manufacturers are planning to raise selling prices by US$2–US$2.50 per carton in October, with another potential increase in November should nitrile latex costs continue rising.
The research house cautioned that most of the planned October adjustment would merely offset higher gas costs, limiting the potential improvement in profitability.
RHB also highlighted the influence of Chinese producers on Malaysian glove pricing.
Chinese generic nitrile glove prices currently stand at approximately US$18.50 per carton, just US$0.50 below the US$19 charged by Malaysian manufacturers for non-US markets.
The price gap has narrowed significantly from US$1.50–US$2 in early August, suggesting that increases by Chinese producers have created room for Malaysian manufacturers to follow suit.
RHB noted that the reverse occurred when declining latex costs prompted aggressive price reductions by Chinese manufacturers, forcing Malaysian producers to lower their prices.
According to the research house, Chinese manufacturers retain a competitive cost advantage through their use of cheaper coal instead of gas and more secure nitrile latex supplies.
This gives them greater flexibility to reduce prices, leaving Malaysian manufacturers exposed to pricing decisions made by their Chinese counterparts.
Despite maintaining its cautious sector outlook, RHB acknowledged potential near-term earnings upside if the anticipated October price increases are fully implemented.
The research house expects fourth-quarter earnings to improve under such a scenario, supported by a USD/MYR exchange rate of 4.076 compared with its assumption of 4.00.
Nevertheless, it said several quarters of improved profitability would not materially alter its valuation of glove companies unless the recovery proves sustainable.
A more meaningful improvement in target prices would require the industry’s excess production capacity to be absorbed, allowing manufacturers to regain stronger pricing power.
RHB maintained Riverstone as its preferred glove-sector exposure, favouring the company’s positioning in higher-value cleanroom gloves.
The research house said cleanroom glove pricing is negotiated less frequently, while the associated product premiums tend to be more resilient than those of generic examination gloves.
Key upside risks to its cautious sector stance include a stronger US dollar against the ringgit, higher-than-expected glove ASPs, slower capacity expansion, lower raw material prices and a more favourable tariff environment for Malaysian manufacturers relative to their competitors.
