Chinese toy stories deliver the goods

Move over pandas, drones and night markets, there's a new "economy" in town grabbing the attention of analysts - and the cash of bolder investors.

It's being driven by Chinese youngsters who are snapping up anime merchandise, comics, games, blind boxes and more like there's no tomorrow, despite the economic downturn in the mainland.

These young spenders have christened the collectibles and places that sell them as "goods" and "goods stores."

While the term may raise eyebrows among language purists, analysts have lost no time in labeling the burgeoning market as the "goods economy" with the erudite among them opting for the more endearing acronym ACGN, which stands for anime, comics, games and novels - also a newly coined term.

Call it what you will, but the goods or ACGN economy was reportedly worth more than 100 billion yuan (HK$106 billion) last year, and has been propelling the fortunes of stocks in the business, especially ones like home-grown collectibles giant Pop Mart International (9992), which has jumped more than 370 percent.

THE NEW ECONOMIES

In recent years, China and Hong Kong have focused on target markets to boost their growth, giving rise to terms such as the silver economy for seniors, the night market economy for hawkers, the low-altitude economy for drones and most recently the panda economy, to fill tourist and merchandise coffers.

But China's affair with pop culture dates back to the eighties when Japan's Astro Boy manga reached its shores and the market has grown exponentially to 102.3 billion yuan in 2023.

Merchandise within the ACGN subculture is vast - from badges, posters, cards, and IP collectibles to figurines, dolls, key rings, stationery, trinkets and more.

Blind box collectibles and other merchandise protected by intellectual property are by and large cheap. A blind box in the mainland typically costs under 70 yuan, and around HK$81 in Hong Kong, but some youngsters end up spending several thousands on them each month.

For the uninitiated, the concept of blind or lucky boxes of toys originated from Japan.

They usually have 12 standard toys and sometimes include a rare edition, which drives their value up tenfold.

Consumers, especially Generation Z, seek them out for the thrill, mystery and excitement they bring. And many are willing to pay small fortunes for rare editions and collectibles.

Jaws dropped when a rare steel badge of Yu Nishinoya - a character from Japanese sport manga series Haikyu!! - fetched 72,001 yuan at an online auction recently.

To put it into context, a blind box of 10 Haikyu! badges costs HK$560 in Hong Kong.

But it meant the world to the successful bidder as it is one of five limited edition badges made in 2018.

INVESTORS PILE ON

Savvy investors, meanwhile, are buying into the boom. While China's markets struggled last month, so-called ACGN stocks prospered, including Alpha Group, a content provider and toy manufacturer which has many successful IP brands to its name.

An index created to track ACGN stocks in the mainland has risen more than 35 percent in just six months, versus the CSI 300 Index's 13 percent growth over the same period.

The Hong Kong-listed Pop Mart has skyrocketed 373 percent this year to HK$94.35 apiece, outperforming the market benchmark Hang Seng Index's 18 percent rise year-to-date.

A user survey by Chinese social media app Soul found ACGN was among the top eight hobbies of youngsters born after 1990.

They spent an average of 1,645 yuan a month on such merchandise, with about 10 percent of them forking out as much as 5,000 yuan.

One in two said they did it for emotional fulfillment.

Qianzhan Industrial Research Institute predicts the ACGN market will be worth a whopping 590 billion yuan in 2029, up by 477 percent from 2023.

Retail giants such as KFC, Kiehls and Luckin Coffee have also jumped on the bandwagon, launching collaborations with popular IPs and luring fans with merchandise as well as bags and paper cups of popular characters.

MALL ATTRACTIONS

Meanwhile, more and more malls are featuring anime merchandise.

A Shanghai department store under state-owned Bailian Group saw sales surge by 84 percent in the first three quarters of the year after it reinvented itself as an ACGN spot in 2023.

In Hong Kong, retail giant Miniso (9896) opened a pop-up store at the Langham Place in October featuring an exclusive collection of Harry Potter blind boxes, plushies, stationery, bags, accessories and home goods under a collaboration with Warner Bros.

And Japanese Harry Potter boutique Mahou Dokoro currently has a pop-up at Festival Walk offering a range of merchandise that includes magic wands, plushies and stationery.

GLOBAL ATTRACTION

Pop Mart's top toys include Molly, created by Hong Kong artist Kenny Wong, Labubu, Skull Panda, Dimoo, Hirono, Zsiga and Hacipupu and the collectibles have been selling like hot cakes across the world, from New York to Paris to Milan. Overseas sales are reported to have jumped fivefold.

While Molly is its top collectible and a hit in China, Labubu, created by Hong Kong-born Belgian artist Kasing Lung and introduced in 2019, has also seen its popularity explode.

Blackpink's Lisa has been sporting Labubu as a lucky charm to the delight of millions of fans while the small monster with high, pointed ears and serrated teeth has also been a massive hit in Thailand, leading the Tourism Authority of Thailand to team up with Pop Mart and name the mascot as an "Amazing Thailand Experience Explorer."

Pop Mart opened a Labubu themed store in Bangkok last month which raked in sales of 100 million yuan on opening day.

Labubu mania has seen Chinese consumers scramble for the furry toy, with some models in the 69-yuan blind box trade at over 4,000 yuan in the secondary market. One university student says she made a killing of 20,000 yuan by speculating on Labubu toys.

TARGETS SET

CICC has raised its target price for Pop Mart by 16 percent to HK$95 on expectations that it will remain at the forefront the "goods economy."

Miniso also sells blind boxes and collectibles under collaborations with Sanrio, Marvel, We Bare Bears, Sesame Street, Coca Cola, Tom and Jerry and Minions, and is a stock to watch.

Miniso has jumped 40 percent since late November and Deutsche Bank expects it stock to hit HK$58 apiece, 25 percent higher than its last close of HK$45.10.

Dickie Wong, executive director of research at Kingston Financial, believes the fervor over "goods economy" stocks will continue in 2025 with Pop Mart and Miniso outperforming the market.

But he warns that enthusiasm for collectibles might one day fade away, pointing out that Pop Mart's shares are quite high. He recommends buying below HK$90 but forecasts the blind box maker will rise to HK$100 apiece.

Ng is more cautious, warning that the current collectibles frenzy is just a "rediscovery" of sorts and there's no new element to it.

And some fans have been struck by buyers remorse. Li Te, who bought 1-gram gold coupon featuring his favorite game Honkai: Star Rail in January at nearly 50 percent more than its original price, regrets the 899-yuan impulse buy, saying the premium he paid was "way too much, even for wealth management."