Fears of Labubu crackdown in China sink Popmart shares
While the commentary didn't call out Pop Mart by name, it spooked traders who have propelled the company's stock to a nearly 170 per cent gain this year amid the craze for its toothy monster dolls.
Pop Mart often sells its dolls inside a blind box, which means the buyer doesn't know what specific character is inside until they open it.
Shares of the Beijing-based toymaker, which has a market value of about $US40 billion ($61.7b), dropped as much as 6.6 per cent after tumbling 5.3 per cent on Thursday.
China should further refine regulations for 'blind cards' and 'mystery boxes' as some of the current business models induce minors to become addicted to purchasing these products, according to a feature story carried on the 19th page of the People's Daily, the flagship newspaper of the Chinese Communist Party, citing legal experts.
'The commentary has weighed on investor sentiment, flashing some overheating signs in its business,' said Steven Leung, an executive director at UOB Kay Hian Hong Kong, referring to Pop Mart.
'Still, it's a mild reminder as it didn't come directly from a government official.'
In China, the government prohibits sales of blind boxes to children under the age of eight due to concern over potential addiction. Before the authorities imposed such guidelines in 2023, regulatory risk was a key concern among investors.
But even with the slump this week, Pop Mart shares are still the best performers in the MSCI China Index, as consumer fervour for its toys has turned it into one of the hottest Chinese growth companies.
Wall Street analysts have been increasing their price targets for the company, citing the growing influence of its intellectual property.
Celebrities including Rihanna and BlackPink's Lisa have been spotted carrying Pop Mart's toys, making it one of China's most notable consumer brands to gain popularity globally.
Policymakers in Beijing have sought to encourage such success stories, which may temper expectations for a more disruptive crackdown.
'We believe the government remains supportive of China's IP development, but wants to protect minors and iron out irregularities,' Jefferies analysts including Anne Ling wrote in a note.
'In the short term, there will be pressure on share prices for the entire pop toy segment, especially those that have outperformed year-to-date.'
Kayou, a Chinese maker of trading cards, pushed back its plan for an initial public offering in Hong Kong last year after negative publicity surrounding the industry from Chinese state media. It refiled for the listing in April.
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