In an unexpected day, the United States banned Top Glove disposable medical grade gloves from being imported to US and Bursa Malaysia ground to a halt. Learn the details of what happened and the resumption of business as usual.

On July 15, 2020 the US Customs and Border Protection (USCBP) put out a detention order for disposable gloves produced by subsidiaries of Malaysia’s leading medical glove maker, Top Glove Sdn Bhd and TG Medical Sdn Bhd.

This event caused quite a stir in the Malaysian equity market with Top Glove confirming the detention and share prices falling 9% to RM19.70 in Bursa Malaysia and falling 11% to SGD6.49 in Singapore Exchange (SGX). The following day as of closing, Top Glove share prices have rebounded strongly to close back to RM22.92 and SGD7.50 respectively.

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What Caused Top Glove’s US Ban?

The ban came after the US claimed that Top Glove is using forced labour citing evidence of forced labour activities with debt bondage. A Withhold Release Orders (WRO) for imported goods with labour forced issues was isssued.

“This WRO sends a clear and direct message to U.S. importers that the illicit, inhumane and exploitative practices of modern day slavery will not be tolerated in U.S. supply chains.” ~US Customs and Border Protection (USCBP)

USCBP added that they will still allow entry of glove products from other manufacturers and that other US imports of the same type of gloves will not be impacted.

Top Glove’s Response

Top Glove CEO, Tan Sri Dr Lim Wee Chai in an online press conference believe the ban came about as the US only heard from non-government organisations, activitsts and foreign media.

“I wish I could invite USCBP here to see firsthand how things are before they had taken action.” ~Tan Sri Dr Lim Wee Chai, Top Glove CEO

Top Glove Managing Director, Lee Kim Meow said the two issues that concerned USCBP is repaying workers recruitment fees that was paid to recruitment agencies and passport retention.

“We have not kept worker passports for over two years, and have even implemented a best practice of making available two locations for the workers to keep their passports. They can keep it at their hostel, or here in the office, where there is security and CCTVs,” ~Dato’ Lee Kim Meow, Top Glove MD

Top Glove also shared that the company tracks their foreign workers through the human resources (HR) department and estimated it will cost RM20 million to RM50 million to fully reimburse recruitment fees. Top Glove management gave their reassurance that the matter can be handled the next two weeks and the existing stock will be taken up by other buyers. Top Glove also added that imports to US can still continue through Aspian Sdn Bhd.

Bursa Trading Halted

In other news, trading on Bursa Malaysia was halted at 3.30pm on July 16, 2020 shortly after the news of Top Glove’s ban. The official statement from Bursa Malaysia cited it as a technical issue which halted Bursa’s securities trading system.

“We apologise to all our valued clients and stakeholders for the interruption in trading. Together with our partner NASDAQ, we are taking appropriate action to prevent similar issues from recurring in the future.” ~Datuk Muhamad Umar Swift, Bursa Malaysia CEO

Trading activities resumed as normal on the morning of July 17, 2020 at 9:00am with action having been taken by Bursa to diagnose the issue. Bursa also denied rumors that the halt was caused by cybersecurity issues and that Bursa’s systems remain secure.

Overall

Top Glove’s share price drop causing quite a stir among investors but the price rebound quickly the following day. However, most analysts remain optimistic that the issue can be resolved as market demand for medical grade disposable gloves remain high and alternatively Top Glove can find markets in other countries with a strong demand.

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