Closing SK hynix's 50.7% ADR premium would take a third out of the Nasdaq price

For the receipt to reach JPMorgan's $245 target while the bank's won figure holds, the Seoul share has to nearly double to about 3.3 million won and the gap has to close to nothing ^[11]. Hold the premium at 50.7% instead, and 3.3 million won in Seoul is about $369 on Nasdaq ^[6]. The comparison on the 14th implies 1,346 won to the dollar ^[3].

The cross-border flow offered as the explanation is small next to the selling it left behind. Korean investors bought a net $713.85 million of the ADRs from the listing through the 11th, about 960 billion won, according to the Korea Securities Depository ^[7]. Over the same period, retail investors sold a net 5.97 trillion won of the Seoul-listed common shares ^[8]. That is 16.1% ^[7]. Foreign investors sold 8.68 trillion won and institutions 3.97 trillion, and other corporate entities, a category that includes SK hynix's own buybacks, absorbed 18.66 trillion won, roughly the 18.62 trillion the three selling groups released ^[8][8]. The size of the ADR float has not been disclosed, so 960 billion won cannot be measured against the receipts outstanding.

Currency worked against the premium, and it widened anyway. The won has strengthened more than 10% against the dollar over the past two months, lowering the won-converted value of a dollar-priced receipt ^[6]. The gap still went from 19.13% on July 31 to 34.52% on Aug. 31, 43.32% on the 9th and 50.7% on the 14th ^[4]. The receipts have moved hard on the way: $193.92 on July 14, then $126 on July 29, a 35% fall in a fortnight ^[16][11], then a record close of $198.63 on the 9th ^[16].

Both lines sit on the same forecast. JPMorgan says memory demand will not prove a short-lived boom, and expects big tech's AI infrastructure spending to sustain a memory growth cycle for at least five years ^[12]. The bank likes that more than 50% of SK hynix's memory capacity is locked into long-term supply contracts ^[13]. It looks for earnings per share to grow an average of 34% a year over the next two years ^[13]. UBS analyst Timothy Arcuri forecast that DRAM and NAND shortages would persist through 2027 ^[14]. Eric Diton, president of Wealth Alliance, likened the semiconductor industry to the "picks and shovels" of the U.S. ^[15].

I would expect the gap to compress, because it already has once: at July 31's 19.13% premium with Seoul unchanged, the receipt is worth about $150, some 21% below where it closed ^[10]. The case on the other side is inclusion in the Philadelphia Semiconductor Index, which the market cites for the passive money it would bring in ^[10]. Then there is the access argument: one ADR costs about a tenth of a Seoul-listed share, and Korean investors have kept buying through a less favourable tax treatment ^[9].