US investors are purchasing SK Hynix shares at a 51% premium compared to those trading on the Seoul exchange, following a nearly 13% rise in Seoul's stock prices on July 15. This significant price divergence continues even after Seoul's market recovered to a 10% increase from previous close.
Factors Behind the Premium
The elevated demand for SK Hynix’s US-listed shares is primarily driven by strong options trading and an optimistic outlook regarding tighter supplies in the AI memory sector. According to data from Bloomberg, options trading commenced with the American Depositary Receipts (ADRs) listing, where speculative trading has pushed the share price beyond that of the common stock listed in Seoul.
As of Tuesday, the US shares closed at $193.92, marking a rise of 27.29%. However, they faced a 2.2% decline in after-hours trading. The structural limitations on converting common shares into the US listings have created a barrier to arbitrage, allowing the premium to persist.
Market Analysis and Predictions
Barclays has begun coverage of SK Hynix with an overweight rating, setting a price target of $330. Senior analyst Kim Sunwoo from Meritz Securities stated that DRAM suppliers are only able to meet 75% to 80% of current demand. He anticipates that the shortfall will intensify through 2027, suggesting a continued rise in memory prices and profits.
Kwak Noh-jung, the CEO of SK Hynix, has projected the most severe supply shortage in the global memory sector by 2027, predicting that demand will exceed production capabilities well into the next decade. Following a rough trading week, where Seoul-listed shares plummeted by 10% amid broader market pressures, the recent gains in SK Hynix’s stock reflect a rebound in the semiconductor sector, with significant advances seen in other companies like Samsung Electronics.
The strong performance of SK Hynix and the dual listing's success have garnered attention from international firms considering similar listings in the US market. However, the unusually high 51% premium between the two stock classes is not expected to last indefinitely, implying potential volatility in either direction as traders seek to normalize prices.
This material is for informational purposes only and should not be construed as financial advice.
