Short Sellers Swarm One of Pandemic’s Hottest Trades in Asia

(Bloomberg) -- Malaysia’s medical glove makers, one of the hottest pandemic trades, have seen bearish bets surge since the Southeast Asian nation lifted a ban on the practice at the start of this year.

Since Malaysia’s decision took effect on Jan. 1, stocks worth 1.8 billion ringgit ($447 million) have been sold short, of which more than 90% were glove makers such as Top Glove Corp., according to data from Malaysia’s stock exchange compiled by Bloomberg.

The resumption of short selling is spurring volatility and amplifying woes of glove makers already pressured by vaccine rollouts after last year’s nosebleed rally. Top Glove, the biggest in the sector, has lost about a third of its value since a peak in October.

“The negative news flow and short selling will add the so far missing counterview in the glove stocks performance,” said Geoffrey Ng, director at Fortress Capital Asset Management Sdn. “It won’t be a one way ticket up.”

Top Glove shares fell 1.1% at the close in Kuala Lumpur trading, halting a four-day gain, while Hartalega Holdings Bhd. dropped 2.2% and Supermax Corp. retreated 3.7%.

Malaysia early last year introduced a temporary ban on short selling to ease stock volatility sparked by the coronavirus outbreak. The prohibition was later extended to year-end.

Top Glove was the most shorted stock by value in the first trading week of this year. Short bets on the glove maker have risen at a time when global investors have increasingly focused on the containment of virus infections among workers at the glove maker.

Read: Short-Selling Restart Adds to Woes of Asia’s Hot Pandemic Trade

BlackRock Inc. asked for the removal of Top Glove’s board of directors last week citing their inadequate handling of virus outbreaks at company’s plants. The money manager voted against the re-election of glove maker’s six board members and said that it intends to do the same for other incumbent directors in future.

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