50% Surge: Three KOSDAQ Stocks Defy KOSPI's Decline
While the main South Korean index KOSPI is going through tough times, the KOSDAQ market, where small and mid-cap companies are traded, shows the opposite picture. Shares of HLB, SPG, and Peptron have risen by more than 50% over the past month, demonstrating impressive resilience and attracting the attention of investors seeking alternatives to "blue chips."
July was a real test for KOSPI. The index plunged 22% in a month and dropped 34% from the all-time high reached on July 22. Large-scale profit-taking on the last trading day of the month, when the market recovered nearly 18%, only partially softened the blow. The reason for such a sharp decline was a combination of factors: regulators tightened trading rules for leveraged ETFs tracking Samsung Electronics and SK Hynix shares, raising the minimum deposit from 10 to 30 million won, while a global sell-off of tech giants amid cooling interest in artificial intelligence added pressure.
Trading volumes in these ETFs collapsed by 93%, but instead of the expected stabilization, we witnessed a curious phenomenon—capital rotation. Investors began massively pulling funds out of KOSPI "heavyweights" and directing them into smaller companies on KOSDAQ. The KOSDAQ index rose for five consecutive trading days until August 6, ignoring the volatility of the main market. Particularly telling was the drop in SK Hynix shares by 14.65% and Samsung Electronics by more than 13% on July 28—this triggered a flight into assets that, in the market's view, are less dependent on the cyclicality of the semiconductor industry.
What is behind the rally of HLB, SPG, and Peptron?
Each of these companies has its own unique growth story. HLB, a developer of the anticancer drug rivoceranib, has experienced a real rollercoaster. On July 13, the FDA rejected approval for the third time, citing production issues at a Chinese partner. However, just two days later, the regulator lifted restrictions on the plant, triggering a surge in shares of nearly 30% in a single day.
SPG, a manufacturer of high-precision motors and reducers, is steadily growing thanks to its actuator project for humanoid robots. According to IBK Securities estimates, it is the only Korean company with a full range of high-precision reducers for humanoid robots. SPG already supplies products to Rainbow Robotics and is in preliminary talks with American partners.
Peptron rose on August 3 amid rumors of possible involvement in the supply chain of anti-obesity drugs. Investors are betting that Korean manufacturers will take on domestic production of Eli Lilly's monthly GLP-1-based drug. However, no official contract has been signed yet, which adds a speculative element to this story.
My view: The rotation from KOSPI to KOSDAQ is a classic sign that the market is looking for new growth points, but it is also a signal of heightened nervousness. A 50% rise in a month for companies whose fundamentals do not always support such momentum often precedes a correction. Investors should exercise caution and not chase the "hype," especially in the case of Peptron, where the driving force so far is only rumors.