Top Glove tries to pull off a GameStop but both are losing grip

A bid by Malaysian amateur investors to pull off a short squeeze-fuelled rally in glove makers is fizzling out, just like the one by their US peers in GameStop.

Shares in Top Glove, the sector’s bellwether and Malaysia’s most shorted stock, have given up the gains it made since some investors started Bursabets, a Reddit community idealised after r/wallstreetbets to defend Malaysian stocks. Top Glove topped the sell list for retail investors for the week ended February 5, a report by CGS-CIMB Securities showed. And short positions have started inching up again.

From its start on January 28, the online forum was up in arms with a rallying call: support medical glove makers whose shares had come under pressure from short sellers following their meteoric gains in 2020. The forum now has almost 13,000 members.

Now those calls to buy and hold them are falling on deaf ears for three key reasons.

  • Slowing virus infections and global vaccine rollouts are instilling confidence that the pandemic’s end is in sight and therefore the extraordinary demand for gloves is set to ease.
  • The frenzy in US stocks popular with Reddit crowds has itself started to come crashing down. GameStop’s shares dropped 5.9% in New York trading, adding to last week’s 80% plunge, a drop that followed three weeks of dizzying gains.
  • Malaysia, like many other Asian markets, limits the amount of short selling that can happen on a stock. So technically there weren’t any gigantic short positions in glove makers to begin with.

Top Glove fell below its pre-Bursabets level in Kuala Lumpur trading as of 3.59pm, set for a fifth day of declines, its longest losing streak since November 4. Among its peers, Supermax fell below that level on Monday while Hartalega is about 2.4% away from reaching that zone. These stocks had been one of the biggest beneficiaries of the pandemic in 2020.