SK hynix, Listed on Nasdaq in the U.S., Set to Inject Large Dollar Supply Into South Korea

[Financial News] SK hynix, which successfully listed on Nasdaq in the United States, is expected to bring a large amount of dollars into South Korea's foreign exchange market, on a scale comparable to a currency swap.
According to industry sources on the 12th, SK hynix raised about $26.5 billion, or roughly 40 trillion won, through the issuance of American Depositary Receipts (ADR) on the 10th. The dollar proceeds from the offering will be paid to SK hynix when the public offering process is completed on the 14th.
Given that SK hynix plans to use most of the funds for domestic investment, including the Yongin Semiconductor Cluster, the Cheongju P&T7 advanced packaging plant, and the introduction of extreme ultraviolet (EUV) lithography equipment, the large dollar inflow will likely be converted into won. That would amount to a major supply of dollars in South Korea's foreign exchange market.
An SK hynix official said, "The ADR proceeds will be used for the investments disclosed in the securities filing, and part of the funds will be converted into won for execution." However, the size and timing of the currency exchange have not yet been finalized.
Market watchers say the large dollar inflow could help ease the recent weakness in the won, which has persisted for some time. In the foreign exchange market, forward dollar selling appeared even before the ADR issuance was finalized, and the won–dollar exchange rate, which had risen to around 1,560 won intraday, later fell back into the 1,400-won range.
The amount of dollars entering the market this time is being described as comparable to a currency swap. A currency swap helped stabilize markets in 2020, when financial markets were gripped by fear during the COVID-19 crisis and saw unprecedented volatility. The currency swap agreement signed at the time between the Bank of Korea and the Federal Reserve System (the Fed) was worth $60 billion. It functioned as a credit line, and the total dollars actually supplied to South Korea through the arrangement came to $19.872 billion.
SK hynix's $26.5 billion fundraising is also equal to about 73% of South Korea's trade balance surplus in June, which was about $36.2 billion. In particular, the dollars raised by SK hynix are comparable to the Bank of Korea's reported average daily spot FX trading volume for the first quarter of this year, which stood at $33.28 billion. The amount is also nearly twice the roughly $13.6 billion in dollars that the foreign exchange authorities sold on a net basis in the first quarter to defend the exchange rate.
In fact, even SK hynix's currently planned domestic investments already exceed the amount raised through the ADR.
Brokerages expect the company to post operating profit of around 30 trillion won this year, and say that adding cash generated from future operations will further expand its investment capacity in AI semiconductors.
Kwon A-min, a researcher at NH Investment & Securities, said, "Currency exchange is expected to begin in the middle to latter part of this month." She added, "The company will sell dollars in stages to secure the won needed for domestic facility investment, but since a plan to exchange about $100 million a day is also being discussed, the actual dollar supply effect could continue through August and September."

[email protected] Yeon Ji-an Reporter