ESG gains momentum as institutional investors look beyond profitability

Undoubtedly, the electronics manufacturing service (EMS) industry has become the latest testbed – after the glove and plantation sectors – for institutional investors in Malaysia to flex their muscles or to assert their rising concerns on ESG (environmental, social and governance)-related matters.

This ideally set the tone for 2022 on how, in a major way, fund managers will move forward. Fund managers will prioritise “in a bigger way” ESG considerations in their investment decisions – something which could ultimately outweigh their financial interest.

Understanding the glove sector stock rally conundrum

The writing has been on the wall since late 2020 that glove counters would encounter softening market demand and selling prices after a meteoric rise in both demand and share price which commenced at the height of the COVID-19 pandemic (around mid-2020).

Given the forward-looking nature of the stock market, it must be pointed out that there are two contradicting-yet-valid views among investors that are impacting the direction of glove stocks in current times:

• The first view is that with the advent of COVID-19 vaccines, the pandemic will be over, prompting demand for gloves to fall (hence, earnings of glove makers will revert to pre-pandemic levels); and

• The second view is that glove demand will stay high with increasing awareness over hygiene and health (demand for gloves will stay healthy in the post-COVID-19 pandemic era) especially with the advent of the new Omicron variant.

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