Domestic investors investing in Chinese and Hong Kong stocks, known as the 'middle school ants,' have recently been concentrating their purchases on 'Lao Fu Gold.' The stock price of Lao Fu Gold, known as the 'Hermès of the gold market' in China, has surged 221% so far this year.
According to the Korea Securities Depository (KSD), domestic investors have net purchased Lao Fu Gold shares worth $24.09 million (approximately 33.5 billion won) this month (from the 1st to the 30th, based on settlement dates). This amount is the highest for net purchases of Chinese and Hong Kong stocks, exceeding the $22.83 million (approximately 31.7 billion won, ranked second) spent on Alibaba, which is considered a representative stock of the Greater China region. Lao Fu Gold is also ranked 42nd among the top net purchased stocks in the overseas market.
Lao Fu Gold, listed on the Hong Kong stock market in June last year, is a gold jewelry manufacturer specializing in high-quality and high-priced products. It has gained fame for the craftsmanship of artisans who reportedly spend over 600 hours creating each piece, having opened its first store in Beijing in 2009.
The stock price of Lao Fu Gold has skyrocketed by 220% this year and by 1,810% compared to its initial public offering price (from 40.5 to 773.5 Hong Kong dollars). This surge in stock price is related to China's emerging 'new consumption economy.' Corporations such as Lao Fu Gold, which has gained popularity among young consumers in China, alongside Pop Mart, which created a sensation with 'Labbubu' dolls, and the local cosmetics brand Mao Ge Ping, have shown significant improvement in performance despite sluggish domestic conditions, with sales for Lao Fu Gold increasing by 145.7% and 167.5% from the previous year in 2023 and last year, respectively.
The rising demand for safe assets has also influenced the increase in Lao Fu Gold's stock price, as the gold prices rose. According to the U.S. Commodity Exchange (COMEX), gold futures prices have risen by 26% this year as of the previous day. On the 22nd, prices soared to $3,501.8, marking a yearly high.
Unlike other mid-to-low-priced gold jewelry brands, Lao Fu Gold sets selling prices at fixed prices, making it relatively more attractive as an investment. Song Ye-ji, an analyst at Hana Securities, noted, 'This year, sales are projected to grow by over 145% compared to the previous year, and the high valuation burden (price-to-earnings ratio (P/E) of 38 times) will be eased to around 27 times next year due to steep net income growth.'
Earlier this month, Lao Fu Gold's stock price surpassed 1,000 Hong Kong dollars, but it dropped to 773.5 Hong Kong dollars the previous day, signaling a slowdown in its upward trend. However, there are forecasts that it could rebound if the Chinese government approves a supplementary budget in October.
Park Su-hyun, an analyst at KB Securities, commented, 'This year, there is a possibility that China will approve a supplementary budget at the Standing Committee of the National People's Congress in October, similar to 2023, to address employment issues. If the supplementary budget alleviates anxiety regarding consumption and the real estate market, the overall stock market will rise, and buying interest in the new consumption sector will intensify due to the highlighted long-term growth potential.'