SK hynix Thrives in the US, Lags in Korea? May Be a Buy Signal [Weekend Money]

Hyundai Motor Securities: "Similar Results Seen in TSMC Case"

On the morning of the 10th (local time), at the Nasdaq MarketSite in New York, USA, during the 'Opening Bell' ceremony, Taeyon Chey, Chairman of SK Group (center), Nojung Kwak, CEO of SK Hynix, and Seungbeom Go, Outside Director and Chairman of the Board of SK Hynix, rang the bell to announce the commencement of Nasdaq ADR trading. Photo by Yonhap News

With SK hynix's American Depositary Receipts (ADRs) having successfully settled on the Nasdaq market, analysts suggest that as the price gap (premium) between the ADRs and the underlying shares listed in Korea widens, it could provide a catalyst for foreign investors to increase their net purchases of the domestic underlying shares.

According to Hyundai Motor Securities on July 18, the SK hynix ADR, which was listed on the Nasdaq market at $168.01 on July 10—up 12.76% from its initial offering price—continued its upward trend and at one point pushed the gap with the underlying shares to as much as 51%.

Some securities firms have also pointed out that as foreign capital shifts into the U.S. ADRs, it could negatively impact demand and supply in the Korean market. With the ADR listing increasing accessibility for U.S. investors, there are concerns that foreign investors may sell the underlying shares in Korea and move their funds into the ADRs to avoid uncertainties in the Korean stock market or fluctuations in the won-dollar exchange rate.

However, an analysis by Hyundai Motor Securities of the ADRs for TSMC, the Taiwanese foundry (semiconductor contract manufacturing) company, showed that a widening ADR premium did not result in selling of the underlying shares. Instead, when technology stocks were strong in the U.S., the high liquidity of the American market led to a larger ADR premium, and global investors tended to buy the relatively cheaper underlying shares in the domestic market.

Jaeseung Kim, a researcher at Hyundai Motor Securities, explained, "In fact, in the Taiwanese market, when the TSMC ADR premium exceeded 20%, investment appeal for the underlying shares increased sharply, leading to significant net buying by foreign investors."

Kim analyzed, "The SK hynix ADR listing is less likely to serve as a structural outflow factor for foreign investors. Rather, it creates a new price-discovery channel between the U.S. and Korean markets. While there may be short-term supply-demand fluctuations, it is highly likely that the process of finding an appropriate premium will encourage purchases of the domestic underlying shares."

This content was produced with the assistance of AI translation services.