KUALA LUMPUR: UOB Kay Hian Malaysia Research has downgraded the glove sector to underweight from market weight as it fears the moderation of earnings over 2022-23 would drag on sentiment.
In its report on Tuesday, it added that due to the lofty average selling prices (ASPs), the glove makers could revert sharper than expected. Inventory levels in the US are said to have almost restocked to pre-Covid-19 levels, it said.
“We think it could be a bellwether indicator for other key developed countries with similar successful vaccination rollout programmes, which reflect a moderation in demand, ” it said.
UOB Kay Hian Research said it attempts to factor in the possible downside by ascribing its price-to-earnings (PE) valuation component of its sum-of-parts to a -one standard deviation from mean for all the respective companies under its coverage.
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