'Being out of the top 30 doesn't mean it's not good, it's just a bad image.'
FBM KLCI is expected to lose 2 of Malaysia's largest rubber glove companies as the market capitalization of both shrinks below the top 30 ranking.
According to a Citi Research report, Top Glove Corp Bhd and Hartalega Holdings Bhd are now at risk of exiting the main component index of the FBM KLCI 30 Bursa Malaysia.
This is because based on the company's capitalization, Top Glove is in the 48th position with RM5.81 billion while Hartalega is in the 43rd position with RM6.29 billion.
As a context, the FBM KLCI index includes 30 components (companies) that are measured based on the company's capitalization value and any that ranks 25th will be listed while below the 36th position will be removed.
For general knowledge, Top Glove broke the FBM KLCI 30 index in December 2019 while Hartalega in June of the same year.
Commenting on the matter, Citi Research analysts said that although the rubber glove industry experienced a surge, the gloomy outlook was seen as unchanged and flanked by the challenge of rising costs.
He added that despite the spread of new variants and sub-variants of Covid-19, the demand for rubber gloves is still seen to be declining compared to the pre-pandemic period.
In addition, the perceived weakness of the ringgit can support the margin of failure to overcome the challenges in pricing behind the increase in costs.
As a result, Citi Research feels that the rubber glove industry will continue to shrink and companies oriented to the sector will face ongoing challenges.
As of this writing, Top Glove shares are up 0.69% at 73 sen while Hartalega shares are up 0.54% at RM1.85.
