KUALA LUMPUR (Sept 18): Chinese factories firing up in neighbouring countries are posing a growing threat to Malaysia’s glove manufacturers’ exports to the US, RHB Research flagged.

The new facilities in Indonesia and Vietnam owned by China-based companies are expected to prolong a global glut, the research house said in a regional sector note. Competition is also set to intensify in the US as Malaysian rivals offer cheaper products, the research house warned.

Outside the US, competition remains “far more intense due to aggressive pricing by Chinese manufacturers, who continue to undercut regional peers,” RHB Research warned.

July data indicate that the US accounted for 45% of Malaysia’s glove exports, down from 75% in June, while the share of imports declined by over three percentage points month-on-month to 57%.

New facilities being commissioned in Indonesia and Vietnam could produce up to 10 billion pieces annually, according to the research house’s estimates, accounting for about 6% of the five largest Malaysian manufacturers’ combined capacity.

“Factory visits have likely already commenced”, with large clients typically requiring around four months of post-visit validations before placing orders, and it may take five-to-eight months or longer before shipments begin, RHB Research said.

The average selling prices for generic gloves produced in the new plants are expected to be US$1-US2 cheaper for every 1,000 pieces offered by Malaysian manufacturers, the research house noted.

“While sector valuations may appear inexpensive, we view the apparent discount as a reflection of persistent structural headwinds rather than a re-rating opportunity,” RHB Research said, keeping the regional sector call on “underweight”.