RHB keeps rubber products underweight despite high glove demand

Oversupply and pricing pressure outweighed utilisation gains.

RHB Investment Bank maintained an underweight stance on the rubber products sector, saying earnings risks persist despite rising glove demand, according to a press release. The bank said oversupply and weak pricing power continue to cap profitability, leaving valuation as a secondary consideration.

Supply expansion, particularly from China-linked offshore capacity, remains the primary constraint on earnings recovery. RHB said additional capacity entering the market is likely to limit any sustained improvement in average selling prices, even as utilisation levels improve.

RHB forecast global glove demand to increase by 8% in 2026 to about 400 billion pieces, up from 370 billion pieces in 2025, before moderating to 6% growth in 2027. However, the bank said demand growth is insufficient to absorb excess supply, limiting the sector’s ability to regain pricing leverage.

Selling price pressure is expected to persist into 2026, alongside margin headwinds from higher raw material costs and a stronger ringgit. A weaker US dollar may ease some input costs but also undermines pricing power in a price-taker market, further weighing on margins, according to the press release.

RHB said companies with diversified end markets and stronger execution are relatively better placed within the sector, but maintained a neutral view on selected names due to cost pressures. It added that upside risks include firmer selling prices, slower capacity expansion, lower raw material costs, and more favourable currency or tariff conditions, while earnings risks remain skewed to the downside.