Shares in world’s top glove maker are trying to retrace the losses caused in the wake of a detention order by the U.S. on its products.
Top Glove Corp.’s shares rose as much as 15% on Friday after slumping by almost 10% in the previous session for their steepest drop in a month. Some investors are speculating that the company will be able to address the concerns raised by the U.S. as demand for gloves remains elevated due to the still-widening coronavirus pandemic.
The American action is “unexpected but probably immaterial as the U.S. needs more gloves,”said Ross Cameron, a fund manager at Northcape Capital Ltd., which overseas about $7 billion in assets globally. “The other players are all running at full capacity utilization.”
Top Glove, which derives 25% of its sales and orders from the U.S., is reaching out to U.S. Customs to understand the issue better and to resolve the matter within two weeks, Executive Chairman Lim Wee Chai said in a briefing. The affected units account for 12.5% of total revenue, and the company can still ship to the U.S. through other units including Aspion Sdn., he said.
The issue might be related to foreign labor, Lim said, which the company has worked to resolve over the past few months by paying back recruitment fees to its workers.
“If the issue is indeed with regards the pending reimbursement to its workers, we expect a resolution to come through sooner rather than later,” Citigroup Inc.’s analyst Megat Fais wrote in a note on Thursday. “A prolonged ban on paper would be catastrophic but unlikely in our view, especially as the Covid-19 situation in the U.S. remains challenging,” the note added.