50% Surge: Three KOSDAQ Stocks Defy the KOSPI Crash
While the main South Korean index KOSPI is in turmoil after a historic crash, the alternative KOSDAQ market, which lists small and mid-cap companies, is seeing an impressive surge. Shares of HLB, SPG, and Peptron have risen more than 50% over the past month, demonstrating a rotation of capital and a shift in investor priorities.
July proved to be a real stress test for the South Korean market. KOSPI plunged 22% in a month, and from its peak on July 22, the decline reached 34%. The cause was a combination of factors: regulators tightened trading rules for leveraged ETFs tied to Samsung Electronics and SK Hynix shares, raising the minimum deposit from 10 to 30 million won, which led to a 93% collapse in trading volumes for these instruments. In addition, the global sell-off of tech giants due to cooling interest in artificial intelligence only worsened the situation.
Tech downturn and salvation in "small caps"
SK Hynix shares lost 14.65% in a single day on July 28, while Samsung Electronics fell more than 13%. Fears that investments in AI infrastructure have peaked, along with a 39% drop in U.S. memory maker Micron, put enormous pressure on South Korean giants. However, while blue chips were sinking, capital began flowing into smaller but more promising stories on KOSDAQ. The KOSDAQ index rose for five consecutive trading days through August 6, ignoring the turbulence of the main market.
Three growth drivers
The rise of each of the three companies has its own unique drivers. HLB jumped nearly 30% in a day after the FDA lifted restrictions on a Chinese partner's plant, although it had previously rejected the anticancer drug rivoceranib three times due to manufacturing issues. SPG, a manufacturer of high-precision motors and reducers, is steadily climbing on the wave of interest in humanoid robots. In my estimation, it is the only Korean company with a full range of components for humanoid robots, already supplying products to Rainbow Robotics and holding talks with U.S. partners. Peptron rose on rumors of possible involvement in the supply chain for obesity drugs, particularly Eli Lilly's monthly GLP-1 treatment. However, there is no official contract yet, which adds a speculative element to this growth.
This capital rotation is a classic sign of overheating in one segment and a search for undervalued assets in another. However, I also see a fundamental basis here: the HLB and SPG stories are backed by real events and product cycles. Nevertheless, investors should remain cautious: volatility on KOSDAQ is traditionally higher, and news about regulatory approvals or contracts can be unpredictable. The current trend is likely to continue in the short term, but without clear catalysts, a correction will not be long in coming.