Malaysian Glove Makers Rally on Obama’s Health Bill

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Top Glove Corp. led a rally by Malaysian rubber glove makers on speculation President Barack Obama’s U.S. health bill will boost sales.

Top Glove, the world’s biggest, climbed 1.7 percent to a record 13.14 ringgit as of 12:26 p.m. in Kuala Lumpur. Kossan Rubber Industries Bhd., the nation’s third-largest, increased 3.1 percent to 7.64 ringgit, and Adventa Bhd. gained 2.4 percent to 3.48 ringgit. The benchmark FTSE Bursa Malaysia KLCI Index rose 0.3 percent.

Obama’s $940 billion overhaul of U.S. health legislation subsidizes coverage for uninsured Americans, financed by Medicare cuts to hospitals and fees or taxes on insurers, drugmakers, medical-device companies and Americans earning more than $200,000 a year.

The bill may “lead to higher demand for examination gloves in the U.S. when Americans start to visit health-care centers more frequently,” Jason Yap, an analyst at OSK Research Sdn, said in a report today. It will “put more strain on the supply of examination gloves, which is still catching up with demand.”

Adventa, Kossan and Hartalega Holdings Bhd. are the main beneficiaries of the U.S. health-care bill since high-grade gloves account for the bulk of their products targeted at developed countries such as the U.S., he said.

Top Glove and Supermax Corp. will also benefit as the U.S. accounts for 25 percent and 42 percent of their total sales respectively, he said.

Premium Sales

“The strong demand will reaffirm their ability to sell the gloves at a premium and pass on 100 percent of the cost increase to customers,” Yap said. He has an “overweight” rating on the rubber-glove sector.

Malaysian glove makers have posted higher earnings in recent years and expanded capacity as the global flu outbreak bolstered demand. Top Glove on March 17 said second-quarter profit almost doubled to 70.5 million ringgit ($21.2 million) from a year earlier on higher sales.

The glove makers’ earnings are on “growth hormones” and their expansion plans “are intact as demand is still set to rise this year,” CIMB Investment Bank Bhd. analyst Terence Wong said in a report today. “Many of them are expanding capacity in a big way.”