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Wednesday, March 02, 2016

Rubber Glove Stocks: So passé

Our MYR has strengthened somewhat in the past few weeks. Today it is trading at 4.16. If USD-MYR were to go below 4.10, the uptrend line that dates back to September 2014 could be violated. The breakdown of an uptrend line would mean that MYR would likely to trade sideways or even strengthen. On the other hand, if USD-MYR were to rebound from 4.10, then the current uptrend for USD-MYR will continue. At this moment, the jury is out.

 
Chart 1: USD-MYR's daily chart as at Mar 2, 2016_3.45pm (Source: Investing.com)
 
The much anticipated recovery in the MYR has caused sharp sell-off among stocks that had benefited from the weakening of the MYR. No sector has benefited more than the rubber glove sector. That's why rubber glove stocks have been hit quite badly in the past few weeks.

 
Chart 2: Harta's weekly chart as at Mar 2, 2016_3.45pm (Source: ShareInvestor.com)


Chart 3: Topglov's weekly chart as at Mar 2, 2016_3.45pm (Source: ShareInvestor.com)


Chart 4; Kossan's weekly chart as at Mar 2, 2016_3.45pm (Source: ShareInvestor.com)

We can see the correction experienced by Harta, Topglov and Kossan. Kossan is right on the uptrend line now (Chart 4). I believe that the pullback in Kossan share price is overdone. What if USD-MYR rebounded?! All the rubber glove stocks would recover from the current sell-off. Kossan would see a biggest recovery because it is on the uptrend line now. In term of valuation, Kossan & Topglov are cheaper than Harta. The cheapest stock is Supermx but that stock did not correct much.


Table: Rubber glove manufacturer's valuation

Conclusion

Based on the above, I believe rubber stocks could be favorable speculative bets.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Harta, Kossan, Supermx & Topglov.

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