HLIB Research maintained a “neutral” stance on the glove sector, citing potential trade diversions and market adjustments.
PETALING JAYA: The local rubber glove industry is poised for significant shifts in market dynamics, following the United States’ decision to increase tariffs on Chinese medical and surgical gloves from 7.5% to 25% in 2026.
This policy change has prompted strong market reaction, notably boosting the share prices of major Malaysian glove manufacturers.
Hong Leong Investment Bank Research (HLIB Research), which maintained a “neutral” stance on the glove sector, cited potential trade diversions and market adjustments due to the policy change by US president Joe Biden’s administration.
The research house highlighted that the tariff hike could lead Chinese manufacturers to redirect their focus from the United States to European and Asian markets, which might benefit Malaysian companies in the short term.
HLIB Research presented two potential outcomes: one where Chinese players do not lower their pre-tariff prices, allowing Malaysian players to increase their prices and narrow the price gap, and a second scenario where Chinese players reduce their pre-tariff prices to remain competitive, maintaining market equilibrium and resulting in no significant market share gains for Malaysian players.
“For the second scenario, we are ‘neutral’, as this will not help Malaysian players capture market share from Chinese players. Most likely, Chinese players will gradually shift their focus from the US market to Europe and Asia (merely a shift in customer profile between Malaysian and Chinese players, as the market is in equilibrium),” it said.
HLIB Research believes the second scenario is more likely, and hence the tariff increase is not expected to significantly impact its 2026 forecasts.
Despite these scenarios, HLIB Research believes Malaysian players such as Hartalega Holdings Bhd
and Kossan Rubber Industries Bhd, which have not been impacted by the US Customs and Border Protection’s withhold release orders and who possess competitive cost structures, will benefit the most from the anticipated trade diversions.
Meanwhile, Apex Securities Research, who has an “overweight” rating on the sector, highlighted the long-term benefits of the US tariff hike.
The research outfit expects a significant market shift that will favour Malaysian manufacturers due to their established quality and reliability in the global market.
It emphasised that the tariff increase will likely result in higher production costs for Chinese manufacturers, prompting US importers to seek alternatives in Malaysia and Thailand.
“Consequently, we expect Malaysia, being renowned globally for its glove production, may see a recovery in orders and market share in 2026,” it noted.
Additionally, the research outfit expects established players such as Hartalega and Kossan to see the most substantial benefits due to their robust market presence and production capacities.
Looking ahead, Apex Securities Research believes glove players will continue to focus on cost optimisation such as the ongoing decommissioning of inefficient plants, eliminating wastage and reducing massive planned expenditures.
The research house favours Hartalega and Top Glove Corp Bhd as it expects Malaysian glove makers to raise their average selling prices due to industry-wide increases in raw material costs, leading to higher margins.
