Shares of Pop Mart International Group Ltd. dropped sharply in Hong Kong following a commentary in Chinese state media calling for tighter regulations on blind-box toys and trading cards.
The article raised concerns about the addictive nature of these products, especially among minors, putting pressure on Pop Mart’s popular Labubu dolls business.
Although the commentary did not mention Pop Mart by name, investors reacted nervously. The company’s stock had surged nearly 170% this year, fueled by strong demand for its blind-box toys—where buyers do not know which character they will receive until the box is opened.
Pop Mart, based in Beijing and valued at around $40 billion, saw its shares fall as much as 6.6%, after a 5.3% drop the previous day. Bloks Group Ltd., a competitor in the same market, also declined by up to 9.3%.
The People’s Daily, the official newspaper of the Chinese Communist Party, featured the story on its 19th page. It cited legal experts who warned that some business models for “blind cards” and “mystery boxes” encourage minors to become addicted to buying these products. China already bans sales of blind boxes to children under eight, due to addiction concerns.
Steven Leung, executive director at UOB Kay Hian Hong Kong Ltd., said the commentary hurt investor sentiment and highlighted signs of overheating in Pop Mart’s business. However, he noted it was a mild warning since it did not come directly from a government official.
Despite this week’s decline, Pop Mart remains the top performer in the MSCI China Index. Wall Street analysts continue to raise price targets, impressed by the company’s growing intellectual property and global appeal. Celebrities like Rihanna and BlackPink’s Lisa have been seen with Pop Mart toys, boosting the brand’s international profile.
Jefferies analysts, including Anne Ling, said the government likely supports China’s intellectual property development but wants to protect minors and fix irregularities. They expect short-term pressure on share prices in the pop toy sector, especially for companies that have gained strongly this year.
In a related example, Kayou, a Chinese trading card maker, delayed its Hong Kong IPO last year after negative media attention but has since refiled for listing in April.
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