SK Hynix ADR Premium Exceeds 40%, South Korean Investors Buy 1.16 Trillion Won
SK Hynix announced a plan to repurchase and cancel its own shares worth 40 trillion won, leading South Korean investors to buy heavily into its ADR listed on NASDAQ, resulting in a significant premium compared to its domestic stock. Analysts point out that large-scale stock cancellations will not directly eliminate the price difference between the ADR and the domestic stock, as there are conversion restrictions that prevent the arbitrage mechanism from functioning fully, and the price difference may persist in the long term. From the time SK Hynix ADR was listed on NASDAQ on July 10 until August 19, South Korean investors net purchased approximately $835 million (about 1.16 trillion won) of SK Hynix ADR, ranking second among U.S. stocks bought by South Korean investors during the same period, accounting for 16.4% of the total net purchases. On August 19, SK Hynix's domestic stock closed down 9.75% at 1.5 million won, while the ADR rose 0.35% to close at $156.16. The current high premium of the ADR is attributed to differences in liquidity and supply-demand imbalance, rather than differences in corporate valuation. Due to conversion restrictions, arbitrage trading is difficult to realize, making it hard to narrow the price gap.
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