POP MART, the parent company of Labubu toys, has been added to both the benchmark Hang Seng Index and the Hang Seng China Enterprises Index as constituent stocks.

Key Points

POP MART International Group Ltd., the parent company of Labubu toys, saw its stock price decline in the Hong Kong market. The drop was attributed to both profit-taking by some investors following the company's index inclusion and market concerns about POP MART's ability to continuously launch popular collectible toys.

On Monday, POP MART officially became a constituent stock of both Hong Kong's benchmark Hang Seng Index and the Hang Seng China Enterprises Index.

Labubu toys, packaged in "blind boxes" (where the specific style inside cannot be known before opening), once sparked a global collecting frenzy.

Is the Labubu Craze Beginning to Fade?

POP MART's stock price decline in the Hong Kong market was driven not only by "profit-taking following index inclusion" but also by intensifying market concerns about the company's "ability to continuously launch trendy collectible toys" - factors that previously contributed to the stock's strong performance.

On Monday, POP MART was simultaneously included in both the benchmark Hang Seng Index and the Hang Seng China Enterprises Index (the latter tracks mainland Chinese companies listed in Hong Kong). Year-to-date, POP MART's stock has risen more than threefold, while on Monday's Hong Kong market close, its shares fell 7%.

Labubu toys sparked a global collecting craze through their blind box design (where the style inside cannot be determined before opening), and the company recently launched mini versions of these toys. Due to overwhelming demand for these fanged monster-shaped toys, consumers have had to turn to secondary trading platforms like eBay and StockX, where prices are often significantly inflated.

Labubu's popularity has driven business growth for Chinese retail chain POP MART: the company's first-half revenue surged 200% year-over-year to 13.87 billion yuan (approximately $1.94 billion). POP MART's shares were listed in Hong Kong in late 2020.