Shares of SK hynix (KRX:000660) experienced a notable recovery on Tuesday, but the most striking movement was observed in New York, where its Nasdaq-listed American Depositary Receipts (NASDAQ:SKHY) traded at a significant premium over their Seoul counterparts. The ADR premium reached 32.8%, reflecting divergent investor sentiment across the two markets.
Seoul-listed SK hynix shares closed Tuesday up 4.08% at 1.836 million won, while the ADR climbed 8.9% during intraday trading to $164.60. This disparity is particularly noteworthy given that ten ADRs represent one ordinary share. Using the current spot exchange rate, the implied value of an ADR based on Seoul prices stood at $123.94, underscoring the 32.8% premium.
The cross-market gap highlights the distinct trading dynamics between the two venues. The Korea Exchange had closed before the Nasdaq session ended, making the U.S. quote provisional. However, the premium has persisted, albeit narrowing from 38% on July 15 to the current level.
Memory stocks broadly recovered on Tuesday, with Micron Technology (NASDAQ:MU) rising 8.3% and Samsung Electronics (KRX:005930) advancing 6.15% in Seoul. According to Daishin Securities analyst Lee Kyoung-min, the gains were driven by "bargain hunting concentrated on semiconductors." The broader Kospi index rose 3.56% to 6,747.95.
Despite the rebound, SK hynix shares remain 15.8% below their July 10 level, following a 15.5% decline between July 10 and July 16. The recovery has not fully offset recent losses, but the ADR premium offers a clearer short-term indicator of investor sentiment.
Two key corporate events are scheduled for July 29. SK hynix will announce its second-quarter earnings at 9 a.m. KST, and the ordinary shares underlying the ADRs are set to be included in the Kospi. Additionally, two-way conversion between ADRs and Seoul shares is expected to begin on that date, which could rapidly reduce the premium as qualified traders borrow and convert shares.
The first quarter set a high benchmark for SK hynix, with revenue of 52.58 trillion won and operating profit of 37.61 trillion won, resulting in a 72% operating margin. However, SK Group Chairman Chey Tae-won noted on Sunday that memory prices are at unusual highs, with AI-chip demand expected to increase by 60% to 100% in the coming year amid limited supply growth.
Risks remain for investors. The anticipated conversion and share inclusion could quickly erode the ADR premium. Seoul shares are still trading 38.5% below their June 25 peak, and currency fluctuations may affect parity. Until July 29, investors are effectively valuing SK hynix across two distinct market frameworks, with the premium serving as a key indicator of short-term dynamics.
