[Edaily Reporter Kwon Oh Seok ] The price gap between the domestic shares and American Depositary Receipts (ADRs) of SK hynix(000660), a leading domestic semiconductor stock, is widening to a record high. As investors, weary of the extreme volatility and supply-demand instability in the domestic stock market, turn to the relatively stable U.S. market, the unusual phenomenon of stock prices differing significantly depending on the listing market—even for the same company—appears to be intensifying.

According to MP Doctor on the 18th, SK hynix’s stock price closed at 1,697,000 won on the 14th, down 6.35% (115,000 won) from the previous trading day. In contrast, SK hynix ADRs, listed on the New York Stock Exchange on the 11th of the same month, closed at $190.07, up 0.94% from the previous trading day. When converted to won using the ADR-to-underlying-share exchange ratio (10:1) and the exchange rate, the ADR price amounts to approximately 2,558,200 won. This means the price disparity between the two markets has widened to a staggering 50.7%.
Since its listing, SK hynix ADRs have traded at an average premium of around 35% relative to the underlying shares. However, this premium has been widening each month, rising from an average of 32.5% in July to 35.4% in August and 38.7% in September. Although the recent decline in the won-dollar exchange rate created room for the converted price to fall, the price discrepancy actually widened. This is because buying pressure surged as investors sought the affordability of ADRs—which trade at about one-tenth the price of domestic shares—and the stability of the U.S. market, despite the higher tax burden associated with ADRs.
In fact, according to the Korea Securities Depository, domestic investors made net purchases of SK hynix ADRs totaling approximately $713.85 million (about 960 billion won) from the time of the ADR’s listing through mid-month. In contrast, on the KOSPI market, retail investors sold a net 5.9675 trillion won, while foreign and institutional investors sold a net 8.6822 trillion won and 3.9690 trillion won, respectively, flooding the market with shares. This has even led to the emergence of a dedicated blog that calculates the price discrepancy rate daily.
Experts cite declining investor confidence in the Korean stock market as the fundamental cause of this widening divergence. Lee Chang-dae, CEO of Jangin Investment Club, recently appeared on the “Bu-il-nam” YouTube channel and stated, “It seems this situation has arisen because there is a huge difference in confidence between the U.S. and Korean markets,” while adding, “This divergence cannot last long. Ultimately, the Korean underlying shares will rise, and the gap will narrow again.”

Professor Lee Jun-seo of Dongguk University explained, “Fundamentally, there is bound to be a difference in the valuations assigned to the Korean and U.S. stock markets,” adding, “The existence of a conversion ratio structure between the underlying shares and ADRs also appears to be a contributing factor.”
In fact, in the domestic market, every time the stock price rebounds, a flood of profit-taking and stop-loss orders from investors who bought at the peak is hampering the recovery. In contrast, the U.S. market is being supported by global momentum.
The securities industry considers it highly likely that SK hynix ADRs will be included in the Philadelphia Semiconductor Index next year. If included in the index, a massive influx of passive funds could lead to a revaluation of the company’s market value.
A securities industry official predicted, “Ultimately, the domestic shares and ADRs will converge in the same direction,” adding, “Once the negative supply-demand imbalance in the domestic stock market eases and the market stabilizes, the domestic shares could rise sharply within a few months, narrowing the price gap with the ADRs.”