SK hynix (000660) shares slid more than 6% in Seoul on the 14th, falling below the 1.7 million won mark, while the company's American depositary receipts held above $190. The unusual gap, which leaves the same stock trading more than 50% higher in the U.S. than at home, has drawn investor attention to the hynix ADRs.
Seoul 1.69 Million Won vs. U.S. 2.55 Million Won: Gap Tops 50%
SK hynix closed at 1,697,000 won on the 14th, down 115,000 won or 6.35% from the previous session, according to the Korea Exchange. Its ADRs, by contrast, finished at $190.07 in U.S. trading on the 11th, up $1.77 or 0.94%.
Applying the 10-to-1 exchange ratio between the ADRs and the Seoul-listed common shares, along with the exchange rate at the time, puts the ADR price at about 2,558,200 won per common share. That widens the premium of the ADRs over the underlying shares to 50.7%.
The divergence has grown more pronounced in recent weeks. Since listing on the Nasdaq on July 10, the ADRs have traded at an average premium of about 35% over the Seoul shares. The average daily premium expanded to 35.4% in August from 32.5% in July, and to 38.7% so far this month.
The ADRs themselves have swung sharply. After climbing to $193.92 on July 14, they tumbled to $126 on July 29, then moved mostly in the $150 to $160 range in August. They resumed their advance and closed at $198.63 on the 9th, up 7.05% from the prior session and a record closing high since the July listing.
The premium over the underlying shares narrowed to 19.13% on July 31 before widening to 34.52% on Aug. 31, 43.32% on the 9th and 50.7% as of the 14th. The gap has widened even though the won has strengthened more than 10% against the dollar over the past two months, which lowered the won-converted value of the ADRs.
Korean Investors Buy 960 Billion Won of ADRs While Selling in Seoul
Order flows show the contrast between the two markets. Korean investors bought a net $713.85 million, or about 960 billion won, of SK hynix ADRs from the listing through the 11th, according to the Korea Securities Depository.
Over the same period, selling dominated the Seoul market. Retail investors sold a net 5.97 trillion won of SK hynix common shares, while foreign investors and institutions were net sellers of 8.68 trillion won and 3.97 trillion won, respectively. Other corporate entities, a category that includes SK hynix's own share buybacks, absorbed 18.66 trillion won worth of stock.
The continued buying, despite the ADRs' less favorable tax treatment, is attributed to their listing on the relatively stable U.S. market and to expectations that the high premium will persist. The fact that one ADR costs about a tenth of a Seoul-listed share also makes the stock more accessible to smaller investors.
Possible inclusion in the Philadelphia Semiconductor Index is another factor cited by the market, on expectations that passive funds tracking the index would flow in should it happen. In Seoul, meanwhile, profit-taking and loss-cutting by investors who bought during the earlier surge are weighing on the share price recovery.
Wall Street Sees $245 to $250, Memory Boom Through 2027
Global investment banks continue to set high targets for SK hynix.
JPMorgan initiated coverage of the SK hynix ADRs on the 11th with an Overweight rating and a price target of $245. Taking the exchange ratio into account, that corresponds to about 3.3 million won per Seoul-listed common share.
The bank said memory demand will not prove to be a short-lived boom, as the spread of agentic artificial intelligence, in which AI makes its own judgments and carries out tasks, drives a surge in data processing. It projected that continued AI infrastructure spending by global big tech companies could sustain a long-term growth cycle in memory chips for at least five years.
JPMorgan also viewed favorably the fact that SK hynix has locked in more than 50% of its total memory production capacity through long-term supply contracts, reducing exposure to price swings. It expects the company's earnings per share to grow an average of 34% a year over the next two years.
Bank of America raised its rating on the SK hynix ADRs to buy on the 9th with a price target of $250. UBS analyst Timothy Arcuri forecast that shortages of DRAM and NAND flash memory would persist through 2027.
Optimism about the chip industry itself also runs strong. Eric Diton, president of Wealth Alliance, likened the semiconductor industry to the "picks and shovels" of the U.S. gold rush, saying investors would struggle to find a better place to put their money than chips in the current market.
