Shares of Labooboo's creator posted their biggest gain since August. Do they still have potential?
The company was supported by the Chinese government's new measures to stimulate consumption
Shares of the manufacturer of popular toys Labubu - Chinese company Pop Mart International Group - jumped on November 27, the strongest over the past three months and became the driving force of the rally in the sector of consumer companies in the country,writes Bloomberg. At the end of trading, Pop Mart's quotations rallied almost 7%, and at moments the growth exceeded 10%.
The market reacted to the publication of details of the state plan to stimulate consumer demand, which the Chinese authorities disclosed on November 26. As Reuters notes , the document for the first time separately spells out for the first time the specific segments that will be targeted by the government's measures: they include "pet products, anime and fashion toys", as well as household and children's goods. These clarifications make the plan directly relevant to Pop Mart, which previously had no clearly defined industry support.
As part of its strategy to boost domestic demand, Beijing wants to improve the quality and variety of consumer goods, expand the availability of popular categories and support manufacturers. According to Reuters, the Chinese government's plan includes a wide range of measures, from subsidies and tax breaks for companies producing in-demand goods to accelerated market launch. The document also outlines steps to develop logistics, raise quality standards and expand sales channels in the regions, as well as create conditions for scaling up products that are rapidly gaining popularity, including collectible toys.
Against this backdrop, shares of such companies as toy and constructor manufacturer Bloks Group or the international chain of low-cost household goods Miniso Group Holding also rose.
"Positive government rhetoric has supported the overall sentiment in the consumer sector," said Morningstar analyst Jeff Zhang. Pop Mart's holiday series for Thanksgiving and Christmas are likely to attract fans around the world, he said.
Pop Mart's success contrasts with the sluggish performance of the Chinese economy, Bloomberg notes . The company's stock has repeatedly become one of the best performers on the Hong Kong exchange thanks to the frenzied demand for Labooboo dolls. However, there are growing doubts in the market about the sustainability of the rally: according to S&P Global, the volume of short positions on this paper reached the maximum for more than two years, writes Bloomberg. At the same time, an optimistic view prevails among analysts: only one investment house recommends selling Pop Mart shares. And the average target price assumes the potential growth of almost 60% relative to the last close of trades, shows FactSet.
This article was AI-translated and verified by a human editor
