"While Retail Investors Hesitate, Institutions Are Buying"... Why Overseas Funds Are Flocking to SK hynix
On May 7, Meritz Securities stated that ahead of SK hynix's listing of American Depositary Receipts (ADR) in the United States, overseas institutional investors' interest is rapidly increasing in the existing global depositary receipt (GDR) market.
Sunwoo Kim, a researcher at Meritz Securities, said in a report that, "Starting with the issuance of GDRs worth 120 billion won by Hyundai Electronics in 1999, and after transitioning to Hynix Semiconductor in 2001, the company issued GDRs worth 1.6 trillion won." He added, "Recently, a considerable number of original shares have been converted to GDRs and have started trading actively with a premium on the Frankfurt Stock Exchange in Germany."
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Since April 15, SK hynix GDRs have traded at an average premium of 2.3% compared to the underlying shares. GDRs are depositary receipts that allow overseas investors to invest in a company's shares without directly trading the underlying domestic shares. In this structure, a depositary bank holds the original shares and issues certificates based on them, which are then traded in overseas markets. Since ADRs and GDRs are structurally the same type of depositary receipt, the composition of GDR investors and their trading patterns can provide clues to the potential demand from foreign investors.
Researcher Kim explained, "The rapid expansion of corporate value due to a sharp memory upcycle, increased investor understanding of memory as a key AI component, SK hynix's relatively undervalued valuation compared to Micron, and the expected inflow of passive funds if included in the Philadelphia Semiconductor Index all make the issuance of SK hynix ADRs an attractive investment opportunity." He continued, "Overseas long-term funds are already actively including SK hynix in their portfolios, and the trading pattern has entered a phase of institution-driven demand expansion." He analyzed, "Upon ADR listing, rather than worrying about a demand vacuum, attention should be paid to the potential stock price increase resulting from the expansion of institutional platforms."
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