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Where next for Top Glove’s Malaysia share price after soaring 32% in 3 days?

Malaysian glove manufacturer Top Glove Corporation’s share price remains in bullish territory on Tuesday 21 July 2020, three days into the company’s latest price rally. As at 15:00 SGT on Tuesday, the stock – listed on both the Singapore Exchange and Bursa Malaysia, is trading at S$8.24 per Singapore share. It is also currently among…

Top Glove share price: what’s the latest story?

Malaysian glove manufacturer Top Glove Corporation’s share price remains in bullish territory on Tuesday 21 July 2020, three days into the company’s latest price rally.

As at 15:00 SGT on Tuesday, the stock – listed on both the Singapore Exchange and Bursa Malaysia, is trading at S$8.24 per Singapore share. It is also currently among IG’s top ten most traded stocks.

IG’s market analysis show that ‘buys’ form 77% of all trades on the Top Glove counter today. Across the week, ‘buys’ also dominate trades at 54%.

In terms of client outlook, 94% of IG client accounts with open positions in this market expect the price to rise, with the remaining 6% anticipating a price decline.

Meanwhile, its Malaysia shares – tracked by IG’s Malaysia 30 Index – are trading at 24.36 ringgit each.

What caused Top Glove’s recent massive share price surge?

Top Glove’s current share price rally began last Friday 17 July, as the company rebounded from reports a day earlier that two of its subsidiaries were placed under a detention order by US Customs and Border Protection (US CBP).

This means that any disposable gloves distributed by the two entities cannot be sold in the US – which form 25% of Top Gloves’ total sales and orders. However, investor and analyst rumblings about a potential resolution was able to quickly put those concerns to bed.

This allowed Top Gloves’ Singapore and Malaysia stocks to finish the week 16% and 17% higher respectively.

On Monday 20 July, Top Glove’s share price received another boost after it announced the issuance of up to 5,476,974,322 (5.48 billion) bonus ordinary shares to existing shareholders.

The proposed bonus issue will be undertaken on the basis of two bonus shares for one existing new ordinary share, according to a Bursa Malaysia filing.

Following the announcement, Top Glove’s Singapore shares rose nearly 9% to hit a new all-time high of S$8.54, based on IG data.

IG’s industry-leading CFD trading platform allows you to buy long and sell short Top Glove shares without having to trade the actual asset. Start today by opening a live or demo IG account.

The world’s largest glove manufacturer has been one of the top Southeast Asian equity stories this year, as its market capitalisation has skyrocketed over 400% since the start of the year.

The company has been a rare beneficiary of the Covid-19 pandemic, with its disposable rubber gloves in hot demand among both medical and non-medical sectors.

Analysts raise Top Glove average share price target to 33.13 ringgit

Top Glove’s Malaysia shares currently have an average price target of 33.13 Malaysian ringgit per share, based on the eight newest analyst reports and ratings. This equates to a 34.6% upside from the last traded price of 24.60 ringgit.

Public Bank analysts on 21 July reiterated a ‘buy’ rating on the stock, while raising their price targets to 26.70 ringgit. They also increased their price-to-earnings ratio for the stock to 33x (at a +1 standard deviation of its five-year historical mean).

The analysts stated that the bonus issue ‘did not come as a surprise’ as this is ‘seen as a form of reward to existing shareholders’, considering Top Glove’s share price performance this year.

On the point of the US CBP ban, they noted that Top Glove has been requested to perform an audit before the ban can be lifted. ‘We think that Top Glove will likely pass the audit, considering that the group has successfully completed close to 80 audits in CY19,’ they wrote.

Meanwhile, RHB analysts also maintained a ‘buy’ call on Top Glove, alongside a higher target price of 33.30 ringgit per share, up from 28.88 ringgit previously. This represents an over 30% upside and estimated 1% annual yield.

The researchers wrote that they are positive on the stock as they believe the company’s average selling price (ASP) has increased further, with the demand-supply imbalance of gloves still prevalent amid the ongoing Covid-19 pandemic.

‘As a result, we have raised our FY20-22 earnings estimates by 17-68% after raising our ASP estimate,’ they added.

However, an ‘effective’ Covid-19 vaccine that will be made available globally ‘sooner than expected’, as well as a longer-than-expected resolution of the US CBP detention order, are two potential risks of Top Glove’s continued share price performance in the coming months.

How to trade Top Glove shares with IG

Are you feeling bullish or bearish on Top Glove’s share price? Either way you can buy (long) or sell (short) the asset using derivatives like CFDs offered on IG’s industry-leading trading platform in a few easy steps:

  • Create a live or demo IG Trading Account, or log in to your existing account
  • Enter <Top Glove Corporation Bhd.> in the search bar and select the instrument
  • Choose your position size
  • Click on ‘buy’ or ‘sell’ in the deal ticket
  • Confirm the trade
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Daily Financial News

Don’t Count On JPY Correction; Staying Long GBP/JPY

The path of the potential pace of the JPY decline may still be underestimated by markets, which continue trading the JPY long.

While the 10% USDJPY advance from September lows looks impressive from a momentum point of view, it may no thave been driven by Japan’s institutional investors reducing their hedging ratios or Japan’s household sector reestablishing carry trades.

Instead, investors seemed to have been caught on the wrong foot, concerned about a sudden decline of risk appetite or the incoming US administration being focused on trade issues and not on spending. Spending requires funding and indeed the President-elect Trump’s team appears to be focused on funding. Here are a few examples: Reducing corporate taxation may pave the way for US corporates repatriating some of their USD2.6trn accumulated foreign profits. Cutting bank regulation could increase the risk-absorbing capacity within bank balance sheets. Hence, funding conditions – including for the sovereign – might generally ease. De-regulating the oil sector would help the trade balance, slowing the anticipated increase in the US current account deficit. The US current account deficit presently runs at 2.6% of GDP, which is below worrisome levels. Should the incoming government push for early trade restrictions, reaction (including Asian sovereigns reducing their holdings) could increase US funding costs, which runs against the interest of the Trump team.

Instead of counting on risk aversion to stop the JPY depreciation, we expect nominal yield differentials and the Fed moderately hiking rates to unleash capital outflows from Japan.The yield differential argumenthas become more compelling with the BoJ turning into yield curve managers. Via this policy move, rising inflation rates push JPY real rates and yields lower, which will weaken the JPY. Exhibit 12 shows how much Japan’s labor market conditions have tightened. A minor surge in corporate profitability may now be sufficient, pushing Japan wages up and implicity real yields lower.

JPY dynamics are diametrical to last year . Last year, the JGB’s “exhausted”yield curve left the BoJ without a tool to push real yields low enough to adequately address the weakened nominal GDP outlook. JPY remained artificially high at a time when the US opted for sharply lower real yields. USDJPY had to decline, triggering JPY bullish secondround effects via JPY-based financial institutions increasing their FX hedge ratios and Japan’s retail sector cutting its carry trade exposures. Now the opposite seems to be happening. The managed JGB curve suggests rising inflation expectations are driving Japan’s real yield lower. The Fed reluctantly hiking rates may keep risk appetite supported but increase USD hedging costs.Financial institutions reducinghedge ratios and Japan’s household sector piling back into the carry trade could provide secondround JPY weakening effects

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Daily Financial News

Mexico raises interest rates, cites Trump as risk

The head of Mexico’s central bank says U.S. Republican candidate Donald Trump represents a “hurricane” sized threat to Mexico.

Banco de Mexico Gov. Agustin Carstens told the Radio Formula network Friday that a Trump presidency “would be a hurricane and a particularly intense one if he fulfills what he has been saying in his campaign.”

Trump has proposed building a wall along the border and re-negotiating the North American Free Trade Agreement.

Mexico’s central bank raised its prime lending rate by half a percent to 4.75 percent Thursday, citing “nervousness surrounding the possible consequences of the U.S. elections, whose implications for Mexico could be particularly significant.”

Mexico’s peso had lost about 6 percent in value against the dollar since mid-August. It recovered slightly after the rate hike

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Financial News

Africa’s first Fairtrade certified gold co-operative offers hope to gold miners living in poverty

Syanyonja Artisan Miners’ Alliance (SAMA) has become the first artisanal small scale mining co-operative in Africa to become Fairtrade certified, bringing much needed hope to impoverished communities who risk their lives to mine the rich gold seam that runs around Lake Victoria.

SAMA is one of nine previously informal groups from Uganda, Kenya and Tanzania which has benefitted from a pilot project launched by Fairtrade in 2013. This innovative program aims to extend the benefits of Fairtrade gold to artisanal miners across East Africa.

In that short time, SAMA has undergone training in business and entrepreneurship, as well as safe use of mercury, internal control systems, labour rights and better working conditions, health and safety and more. Previously, daily contact with toxic chemicals used to process gold meant members risked disease, premature births and even death.  Fairtrade gold was first launched in 2011, and SAMA now joins Fairtrade certified gold mines MACDESA, AURELSA and SOTRAMI in Peru.

The co-operative produces just 5 kg gold per year, but nevertheless has the potential to significantly benefit many people in the local community through better conditions through certification. It is expected that Fairtrade and organizations like Cred Jewellery will support the miners, ensuring their gold can be refined and made available to jewellers in the UK and other markets.

Gonzaga Mungai, Gold Manager at Fairtrade Africa said: “This is a truly momentous and historical achievement and the realisation of a dream that is many years in the making. Gold production is an important source of income for people in rural economies. Congratulations to SAMA, it sets a precedent which shows that if groups like this can achieve certification, then it can work for others right across the African continent.”

The Fairtrade Gold Standard encourages better practice and changes to come in line with international regulation around the production and trade of so-called ‘conflict minerals’. Under the Standard, miners are required to:

  • Uphold a human rights policy preventing war crimes, bribery, money laundering and child labour
  • Clearly represent where the minerals were mined
  • Minimise the risks of conflict minerals through robust risk assessments and collaboration across supply chains
  • Report to buyers and trading partners regarding the risks of conflict minerals

Now in its second phase, the programme will focus on supporting other mining groups in the region to access affordable loans and explore a phased approach to accessing the Fairtrade market, allowing more mining co-operatives across Africa to participate in the programme.

Gonzaga added: “Sourcing African metals from smallscale miners in the Great Lakes Region is the responsible thing to do. For a long time companies have avoided buying gold from this region, with devastating consequences for impoverished communities who were already struggling. It has driven trade deeper underground, as unscrupulous buyers pay lower prices and launder illegal gold into legitimate supply chains. That’s why we have chosen to work with these groups to help them earn more from their gold within a robust compliance system that offers social, environmental, and economic protections.”

The Fairtrade gold programme offers a small but scalable solution to sustainable sourcing of gold from the region in line with Section 1502 of the Dodd-Frank Act in the US, OECD Due Diligence Guidance and recent EU Supply-Chain Due Diligence proposals which could come into effect in 2016. This means that up to 880,000 EU firms that use tin, tungsten, tantalum and gold in manufacturing consumer products could be obliged to provide information on steps they have taken to identify and address risks in their supply chains for so-called ‘conflict minerals’.

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