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While the main South Korean index KOSPI is in turmoil after a massive crash, the alternative KOSDAQ exchange, 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, showcasing a classic capital rotation pattern: investors are fleeing "blue chips" in search of higher returns and new growth stories.

A Weak Month for KOSPI: Fundamental Reasons

July was one of the worst months in KOSPI's history. The index plunged 22%, and from the peak levels updated on July 22, the decline reached 34%. Although a one-day rally of nearly 18% on the last trading day of the month partially recovered positions, the overall picture remains troubling.

The key trigger for the crash was the tightening of regulations on leveraged ETFs focused on tech giants like Samsung Electronics and SK Hynix. Regulators raised the minimum deposit for trading these instruments from 10 million to 30 million won (KRW), sparking a mass exodus. Trading volumes in these ETFs collapsed by 93%, and the sell-off in tech stocks intensified amid global concerns about overheating in the artificial intelligence sector.

Capital Rotation: Why Small Companies Are Winning

Instead of the expected stabilization, we witnessed a flow of liquidity into smaller companies. The KOSDAQ index rose for five consecutive trading days through August 6, ignoring the volatility of the main market. This is a clear signal: investors are revising their strategies, locking in profits in overheated AI stocks and seeking undervalued assets.

The drop in SK Hynix shares by 14.65% and Samsung Electronics by 13% on July 28, along with Micron's 39% collapse, only accelerated this process. Fears that investments in AI infrastructure have peaked are driving capital to seek refuge in companies with more concrete and near-term growth drivers.

Individual Growth Stories: From Drugs to Robots

HLB's rise is tied to the dramatic situation surrounding the anticancer drug rivoceranib. The FDA rejected approval three times, citing production issues at a Chinese partner. However, when the regulator lifted restrictions on the plant just two days after the rejection, shares surged nearly 30% in a single day — a vivid example of how regulatory news can radically change the valuation of biotech companies.

SPG, a manufacturer of high-precision motors and reducers, is steadily climbing 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. The company already supplies products to Rainbow Robotics and is in preliminary talks with American partners — this is not just speculation but a real manufacturing story.

Peptron rose on rumors of possible involvement in the supply chain for anti-obesity drugs. Investors are betting that Korean manufacturers will take on domestic production of Eli Lilly's monthly GLP-1-based drug. There is no official contract yet, but the very existence of such expectations signals high demand for themes tied to the "wellness" economy.

My take: The rotation from KOSPI to KOSDAQ is not just a temporary phenomenon but a structural shift. Investors have realized that the AI infrastructure "bubble" could burst, and they are now looking for companies with concrete products and contracts. However, caution is warranted: a 50% rise in a month is often followed by a correction. The key question is whether these companies can back up their stories with real financial results in the coming quarters. Watch the reports and contracts, not the hype.