Top Glove Corporation

Based on the week 6s return tracking and error results, we decided to continue holding the Top
Glove Corporation stock. This because the annual return of the stock was 4.40%. The excess
return of the stock is 2.39%. It is within the ranges between 2% to 3%, so it can be active or
passive portfolio strategy. We decided to take active portfolio strategy to manage the stock in our
portfolio.
Among the reasons are, as Top Glove is under the industry of health care equipment and
supplies, this industry is having a continuous growth recently. This has been proven where the
export revenue of the medical device industry is expected to increase double-digit percentage in
2016 along with the projected growth of Asean Medical device market which is expected to
double to RM8 billion by 2017 from RM4 billion this year. Therefore, the glove industry has
contributed 52% of the revenue to the growth of this industry. (Tan, 2016). Others factors that
cause this industry move forward was because of increasing hygienic standards and health care
awareness; strict health regulations which mandate the use of gloves the world over and also due
growing ageing population that requires more medical benefits (Top Glove 2016 Annual Report,
2016). Hence, with this expected growth in future and requirements Top Glove able withstand
more stronger in manufacturing industry compare with other companies from same field and this
will always make their stock have good return.
Another reason is due to low OPR rate. Lately, Bank Negara Malaysia has unexpectedly
reduced the Overnight Policy Rate (OPR) by 25 basis point to 3%. (Chin, 2016) So this will
cause the banks to lower their lending rates and make it cheaper for eligible consumers and
companies to take loans. Therefore, this has benefitted TOP Glove, where it can make borrowing

at lower rate and by doing so it make TOP Glove to initiate earlier the expansion process in
Thailand by borrowing at low interest rate.
Besides that, weakening Ringgit Malaysia also has been another reason for us to hold the
stock. This is because, a weaker Malaysian currency makes Malaysian goods cheaper overseas
and it has enhanced the exporters overseas value sales. Since TOP Glove is famous key
manufacturer of rubber glove all over the world, this weakening ringgit Malaysia has been
benefitted the company a lot because this weakening ringgit diminished the adverse impact of
rising raw material cost as well as their margin will be positively impacted as export US dollar
denominated.
Chin, J. (2016, July 13). BNM cuts interest rate to 3%. Retrieved December 5, 2016,
from The Star Online: http://www.thestar.com.my/business/businessnews/2016/07/13/bnm-cuts-opr-to-3pct-at-its-monetary-policy-committee/

Bibliography
Chin, J. (2016, July 13). BNM cuts interest rate to 3%. Retrieved December 5, 2016,
from The Star Online: http://www.thestar.com.my/business/businessnews/2016/07/13/bnm-cuts-opr-to-3pct-at-its-monetary-policy-committee/