SK hynix shares jump 13% on Nasdaq debut day... Will the domestic stock also soar?

[Financial News] SK hynix drew attention on whether the upbeat sentiment would spill over into the domestic market after its American Depositary Receipt (ADR) listing on Nasdaq surged more than 10% on its first day of trading in the United States.
According to the financial investment industry on the 13th, SK hynix American Depositary Shares (ADSs), listed on Nasdaq on the 10th local time, closed at $168.01 on their first day, up 12.76% from the offering price of $149. At one point during the session, they rose as high as $177.
An ADR is a depositary receipt, while an ADS is the actual share linked to it. Based on the fact that one SK hynix ADS corresponds to one-tenth of a Korean common share, the first-day closing price converted into won comes to about 2.532 million won per domestic common share. That is roughly 16% higher than the 2.18 million won closing price of the domestic stock on the 10th.
Based on the first-day closing price, SK hynix's market capitalization is estimated at about $1.2 trillion, surpassing U.S. memory chip maker Micron's $1.1 trillion.
The strong debut of SK hynix ADSs is seen as evidence of strong interest from global investors. Trading volume was also explosive. Total volume for the day reportedly approached 106 million shares, with nearly half of that concentrated within the first 30 minutes after the market opened.
JJ Kinahan, senior vice president at Cboe Global Markets, said, "More than 52 million shares of SK hynix ADRs were traded within 30 minutes of the start of Nasdaq trading," adding, "The huge trading volume energized the market."
Brokerage analysts say the first-day strength of SK hynix ADSs could have a positive effect on the domestic stock, but they also caution that it remains to be seen whether the premium formed in the U.S. market will be fully reflected in the share price in Korea.
Shinhan Investment & Securities said the ADSs are likely to trade above the implied value of the domestic stock in the early stages after listing. That is because U.S. investors can trade in dollars and buy and sell freely during U.S. market hours, while funds that would otherwise have difficulty investing directly in Korean stocks may also flow in.
However, it is unclear whether the high ADS price will immediately translate into gains for the domestic stock. The premium formed in the U.S. market could be carried over to the Korean market, but it could also remain as a separate premium only in the U.S.
Brokerage firms point to TSMC as a representative example. TSMC's U.S. ADSs have often traded at higher prices than its Taiwan-listed shares, largely because restrictions in the conversion process between the Taiwan stock and the U.S. ADS made it difficult for the price gap to narrow.
SK hynix also does not have a fully free conversion structure between its domestic shares and ADSs. The company can limit the level of depositary shares, and converting domestic shares into ADSs also requires certain procedures. Still, it is not clear whether supply is structurally constrained to the same extent as TSMC, so analysts say more time is needed to see whether the premium formed in the U.S. market will be sustained over the long term.
Noh Dong-gil, a researcher at Shinhan Investment & Securities, said, "What domestic investors should watch is not the first-day gain in the ADS, but how much of the premium formed in the U.S. is transferred to the domestic stock," adding, "Since expectations for the listing and concerns about dilution from the offering have already been largely priced in, whether existing hedge and short positions are unwound will be the key variable for the stock price going forward."
nodelay@fnnews.com Park Ji-yeon Reporter