The stock price of SK hynix(000660), an artificial intelligence (AI) semiconductor corporations and Korea's flagship semiconductor stock, surged nearly 30% just three days after its debut on the New York Stock Exchange. A strange phenomenon also unfolded in which the price on the U.S. market traded more than 50% higher than the stock listed on Korea's market, which corresponds to the main stock. It is seen as the result of a flood of money as options and leveraged products continued to see transaction in the U.S. derivatives market in the early days of the listing.
On the 14th (local time), according to Bloomberg and major media outlets, the SK hynix American Depositary Receipt (ADR), which listed on the U.S. market on the 10th, closed at $193.92, up 27.29% from the previous session. Major media said SK hynix posted an explosive rally in just three days after debuting on the U.S. market with a $26.5 billion offering last week.
SK hynix had tumbled 9.3% as the record selling pressure that occurred on the Korean market on the 13th spilled over to the U.S. market. But in just one day it recovered all the losses and reversed higher by 27%.
As the stock price jumped sharply in a day, the ADR price premium soared to 51% compared with the original stock price traded in Korea. Considering the price gap between the two stocks was about 3% at the time of listing, the gap between the main stock and the ADR is widening rapidly. According to a U.S. Securities and Exchange Commission (SEC) filing, one SK hynix ADR represents one-tenth of one share of the original Korean stock. Bloomberg said, "Because there are many restrictions on the process of converting Korean main shares into ADRs, they will transaction at a higher price in the U.S. market."
Experts said the start on this day of full-fledged derivatives transaction on the New York market using SK hynix ADRs as the underlying asset strongly lifted the stock. By noon at the Chicago Board Options Exchange (CBOE), about 150,000 SK hynix option contract had been executed. In the early days of the listing, ADR transaction was highly volatile due to concerns about overvaluation of corporations across the artificial intelligence ecosystem and anxiety that semiconductor investment expenditure may have peaked. But as money poured into options transaction, access to the market appears to have improved significantly.
On this day, more than 10 U.S. exchange-traded fund (ETF) managers, including Leverage Shares, GraniteShares and ProShares, rolled out a series of leveraged products that invest in SK hynix stock volatility. In Korea's market, single-stock leveraged ETF products for Samsung Electronics(005930) and SK hynix are cited as one of the causes of extreme stock volatility. However, as a variety of leveraged products launch on U.S. exchanges, foreign investors now have an environment where they can more easily deploy funds in the world's largest derivatives market without relying on Korea's market, Bloomberg noted.
Many Wall Street global financial firms expect SK hynix shares to rise further for the time being. Simon Coles, an analyst at investment bank Barclays, projected that the shortage in memory chip supply will worsen through 2027. On the chase by Chinese semiconductor corporations, Coles said, "Unless global cloud service providers start using China-made DRAM for data center products, their impact on the global DRAM market structure will be limited." He set a price target for SK hynix at $330 on the day, 117% higher than the previous day.
Nasdaq President Nelson Griggs, referring to the successful SK hynix listing, said, "The success is prompting other international corporations to consider the U.S. for initial public offerings or similar ADR sales."