(Bloomberg) — The new heart of Malaysia’s worrying virus resurgence is an unlikely place — the sprawling factory complex of the world’s largest maker of surgical gloves. It’s putting at risk not just a key export for the Southeast Asian manufacturing center, but also a nascent economic recovery.

The government on Monday ordered Top Glove Corp. to close 28 of its factories in phases, after its facility in Klang, Selangor state recorded 1,067 Covid-19 cases, out of 1,884 new daily cases in Malaysia. New infections continued and hit a record high of 2,188 on Tuesday, of which more than half came from the Teratai cluster linked to the company’s worker dormitories.

Top Glove said Wednesday that the high number of cases was due to increased testing, and that it expects the outbreak at its facilities to end in two-to-four weeks. On Wednesday, Malaysia recorded 970 new Covid-19 infections.

The cluster at Top Glove illustrates the challenges facing the Southeast Asian nation, which seemed to have the virus under control, until late September, when politicians campaigning in an election in the state of Sabah in Borneo helped spread the infection around the country. The resurgence of infections threatens to hinder economic recovery in a nation that supplies about two thirds of the world’s latex gloves.

“The resurgence of Covid-19 infections could threaten growth recovery in the final quarter of this year and possibly in the early part of next year until we have the vaccine,” said Muhammad Saifuddin Sapuan, an economist at Kuala Lumpur-based Kenanga Research.

The outbreak has capped Top Glove’s gains this year, with the stock more than quadrupling on the back of strong global demand for its products. The company’s shares rebounded Thursday from a two-day, 9.5% slump, though the stock is still set for its biggest monthly loss since March 2008 as the company said some deliveries could be delayed by up to four weeks and cut fiscal 2021 sales by 3%.

The Malaysia Rubber Glove Manufacturers Association said in a statement Wednesday that “there is not going to be any aggravated disruption” to the supply of rubber gloves globally as “new capacity is available” to make up for any shortfall. Top Glove’s Chairman Lim Wee Chai, however, told reporters on the same day that “there is a possibility that glove prices will go up,” without elaborating.

The struggle to stem the resurgence has put Malaysia behind Indonesia in Bloomberg’s Covid Resilience Ranking, which measures countries’ success in fighting the virus with minimal social and business disruptions. The latter is ranked 19th — 10 rungs above Malaysia — despite it being Southeast Asia’s virus hotspot.

Top Glove said infections in the Teratai cluster likely originated from cases in early October in the Meru area of Klang. The dormitories are home to thousands of migrant workers, mostly from nations including Nepal and Bangladesh, who are the backbone of Malaysia’s rubber glove sector that is projected to rake in an export revenue of 29.8 billion ringgit ($7.3 billion) this year.

The big jump in new cases appears “localized,” but a failure to control the spread could harm businesses if social restrictions are extended, according to Mohd Afzanizam Abdul Rashid, chief economist at Bank Islam Malaysia Bhd.

“So policy making would be very data dependent and it has to be very nimble and dynamic,” he said.

Malaysia isn’t alone in fighting an outbreak in tightly packed migrant worker dormitories.

Neighboring Singapore has battled infection clusters in foreign worker dormitories, although the country has managed to contain the risk of contagion. An explosion in new cases in these dormitories near the start of the pandemic forced Singapore to adopt strict nation-wide lockdown measures for months.



Top Glove, The World’s Biggest Glovemaker, Raises Money as Virus Fuels Demand


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Top Glove, The World’s Biggest Glovemaker, Raises Money as Virus Fuels Demand

Hand-shaped molds move along an automated production line at a Top Glove factory in Setia Alam earlier in February.

Photographer: Samsul Said/Bloomberg

Malaysia will impose mandatory Covid-19 screening for 1.7 million foreign workers in the country because of high number of cases in the group, the Star reported Thursday, citing Defense Minister Ismail Sabri Yaakob.

“Malaysia needs to adopt health policies used by Singapore for documented workers and provide financial support to factories to implement better housing and public health measures,” Wong Chen, an opposition lawmaker, said on Tuesday. “As for undocumented workers, the government needs to track, document, and provide partial legal work status to them. Without such engagements, they will continue to pose a public health threat to all.”

(Adds comments by industry association and company executive in seventh paragraph)

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