Laboubou producer stocks are having their worst day since April. Is the mania coming to an end?

Shares in social media-popular toy maker Labubu Pop Mart collapsed nearly 9 percent in trading on Monday, their steepest drop in five months. It came on the first day after they were included in Hong Kong's Hang Seng Index. Investors are becoming concerned about the demand outlook for Labooba, causing some to choose to lock in profits.

Shares of the manufacturer of collectible toys Pop Mart sagged more than 7% as a result of trading on Monday, September 8. At the low for the day, the securities were falling by almost 9% - this was their strongest decline in five months, Bloomberg writes. The price fell to 282.2 Hong Kong dollars ($36.2), the lowest since August 20.

Market participants attribute the fall to profit taking after the inclusion of shares in the Hang Seng and Hang Seng China Enterprises indices, explained Bloomberg. Investors, who were counting on growth due to index purchases, preferred to fix profits, explained Bloomberg. The growth of "bearish" sentiment was also shown by the volume of short sales (per price drop), which reached a record on Friday, September 5, the agency added.

Additional pressure comes from concerns about demand for the flagship Labooboo doll series. According to analysts, prices on the secondary market are declining due to oversupply and cooling collectors' interest.

"We are also seeing an increase in negative feedback on the quality of new products, and this is an issue management should address without delay," said analyst Jeff Zhang of Morningstar.

Despite declining interest in Labooboo dolls on the secondary market, analysts remained optimistic about Pop Mart back in August.

For example, HSBC analyst Lina Yan said that the company is able to maintain interest in its brands by regularly launching new series. In addition to Labooboo, Pop Mart has about a dozen other characters that could become the basis for future collections. The bank's recommendation on the stock in August was "buy," Barron's wrote.

Analyst Lydia Lin of Citi noted that the bank also retains advice to buy securities based on expectations that profit growth and expansion into overseas markets will support quotes, Barron's noted.

Pop Mart shares have soared nearly 600% in the past year thanks to hype around "designer toys" and "surprise boxes," becoming a trend with Generation Z. Now, however, resale prices on some Labooboo series have fallen to nearly half their previous levels, notes Business Today.

This article was AI-translated and verified by a human editor