Demand for Gloves exceeds supply

Koon Yew Yin 14 June 2020

How Covid 19 pandemic impacts our lives: 

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For most of the people around the world today, the recent COVID-19 outbreak is a symbol of how fragile and unpredictable our lives can be in an unusual state of affairs. The virus which has changed the way in which most of us live, work or perform our basic day to day functions is continuing to increase its grasp at an alarming rate with the impact being felt at multiple levels resulting in economic slowdown, business disruption, trade hindrances, travel obstructions, public seclusion and so on.

How Covid 19 pandemic impacts listed companies and investors:  

There are about 1,100 listed companies in Bursa Malaysia. Almost all of them with the exception of companies involved in medical gloves and other products for virus prevention, are affected. As a result, almost all investors especially investment bankers are losing money. There are very few good profit growth stocks for investors to buy. That is why all investors are rushing to buy glove stocks. Any investor will look so stupid if he does not own shares in Top Glove, Hartalega, Supermax, Comfort or Rubberex. That is why the share price of all the glove manufacturers have been shooting up like rockets. All of them have gone up a few hundred percent in the last 2 months. 

Due to Covid 19 pandemic the demand for gloves far exceeds supply. As a result, the price for gloves continues to go up higher and glove manufacturers are making more and more profit which is being reflected on their share prices.  

The rapid increase of glove price reminds me of my experience as a co-founder of IGB in selling houses in Ipoh Garden about 50 years ago. The demand for houses far exceeded supply. When we put up 100 houses for sale, a few hundred people wanted to buy. To be fair to all the prospective buyers, we had to invite the Perak MB to draw lots to select the luck buyers.  

We took advantage of the situation; we increased the selling price for the next 100 houses. It did not cost our company anything to increase the selling price. The additional selling price was pure profit. 

I am sure all the glove makers are taking advantage of the high demand for gloves to increase the selling price for their gloves which is pure profit. The normal profit is only about 10-15% of the revenue. I am sure all glove makers are taking advantage of the situation to increase their selling price of their products. 

Yesterday I had a long chat with Mr Khoo, the CEO of Rubberex about the demand and sale of gloves. He told me that like all glove manufacturers, he has increased the selling price. He has no difficulty in selling because the buying orders keep coming and he has not seen the same situation in the last few decades. In fact, he frequently has enquiries from new buyers which he cannot entertain. 

It is likely the demand will continue to exceed supply until Covid 19 pandemic is under control. Many scientists predicted that this pandemic will continue for at least another year. 

Currently US has the most Covid 19 cases in the world. The US has 2.12 million cases and 117,000 deaths. These 2 figures are still increasing. The pandemic has spread to almost all the countries in the world.

The demand for gloves will continue to exceed supply until Covid 19 is under control. 

As I said before investors will look so stupid if they did not buy Glove shares. Investors should hold onto their holdings and do not sell prematurely. The game has a long way to go. 

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