Contra trade ban rumour sends rubber glove shares lower

KUALA LUMPUR (Aug 14): Securities of rubber glove manufacturers including Supermax Corp Bhd, Top Glove Corp Bhd, Kossan Rubber Industries Bhd and Hartalega Holdings Bhd closed down today among Bursa Malaysia top decliners on speculation certain stockbroking firms are banning contra transactions involving glove manufacturers’ shares.

“There are rumours that certain brokers are banning contra transactions in glove stocks, which really curbed appetite,” Hong Leong Investment Bank Bhd senior analyst Ng Jun Sheng told today.

Checks by revealed that one stockbroking firm is scheduled to implement the glove share contra transaction ban on Monday (Aug 17). The stockbroking firm had requested anonymity as this report is written today.

At 5pm today, Supermax’s share price closed down RM1.56 or 8.01% at RM17.92, Top Glove fell RM1.18 or 4.72% to RM23.82, Kossan was 70 sen or 4.64% lower at RM14.40 while Hartalega Holdings Bhd dropped 54 sen or 3.26% to RM16.02.

Rubber glove manufacturers are constituents of Bursa’s healthcare index. Top Glove and Hartalega are constituents of the 30-stock FBM KLCI.

All Bursa indices closed lower at 5pm today. Worst hit was the healthcare index after the gauge fell 201.62 points or 5.09% to 3,762.49. The KLCI ended down 11.83 points or 0.75% at 1,564.59.

In general, contra transactions essentially involve buying and selling the same shares without having to pay for the securities during the contra period.

If an investor disposes of the shares within the contra period at a higher price than the buying price, the stockbroking firm will offset the transaction and pay the investor the profit derived from the transaction.

If the shares are sold at a lower price, the investor will have to pay an amount known as a contra loss to the stockbroking firm.

Bursa Malaysia said on its website that contra dealing is not a right of the client but rather a privilege accorded by the stockbroking company to its clients.

“This means that the stockbroking company is not obliged to allow contra dealing facilities for all its clients,” Bursa said.–The Edge

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