SK hynix surges 13% on first day on Nasdaq, drawing dollar inflows on the scale of a currency swap

[Financial News, New York = Reporter Lee Byung-chul] SK hynix, which entered Nasdaq through a listing of American Depositary Receipts (ADRs), jumped more than 13% on its first trading day, the 10th local time, marking a successful debut.
SK hynix opened at $170 that day and at one point climbed to $177, underscoring strong investor interest. It gave back some of those gains in the afternoon and closed its first day at $168.49. That was 13.1% above the ADR offering price, which was set by applying a premium of about 2.7% to the company’s three-day average share price on the Korea Exchange.
Converted into won, the closing ADR price is equivalent to about 2.528 million won per share, roughly 16% higher than SK hynix’s closing price of 2.18 million won on the previous day’s regular session. Based on the ADR closing price, SK hynix’s market capitalization comes to $1.2 trillion, surpassing Micron’s $1.1 trillion.
The ADR listing raised a total of $26.5 billion, or about 40 trillion won, making it the second-largest deal in the U.S. market after SpaceX, which set an all-time record with its initial public offering last month at $85.7 billion.
■ Focus on domestic investment, including new facilities
According to the securities industry on the 12th, SK hynix plans to use the funds it raised for new facility investments and other purposes. If the proceeds flow into Korea, they are expected to have a "currency swap-level" impact on the foreign exchange market. Because the money raised through this listing is intended for domestic investment, it will actually be exchanged into won. The dollar proceeds will be paid to SK hynix on the 14th, when the offering process is completed.
Given that SK hynix plans to use the funds mainly for domestic investments, including the Yongin Semiconductor Cluster, the Cheongju P&T7 advanced packaging plant and the introduction of extreme ultraviolet (EUV) lithography equipment, it means a large amount of U.S. dollars will be converted into won. That will create a significant supply of dollars in the Korean foreign exchange market.
An SK hynix official said, "The ADR proceeds will be used for the investments disclosed in the securities registration statement, and part of the funds will be converted into won for execution."
Market participants expect the actual currency conversion to begin in late July and continue through August and September after the proceeds are deposited. There is also a strong possibility that the company will sell dollars in installments in line with its investment schedule.
The move is expected to provide major relief to Korea’s foreign exchange market, which has been under pressure from a strong U.S. dollar. On the 12th, the market viewed the large inflow of dollars as a factor that could ease the won’s recent weakness, or rising exchange rate. In fact, before the ADR issuance was finalized, forward dollar-selling orders pushed the intraday won–dollar exchange rate, which had risen to around 1,560 won, back into the 1,400-won range.
■ Dollar inflows expected from late July through September
The incoming dollar volume is also being described as being on the scale of a currency swap. During the 2020 COVID-19 crisis, the financial market was thrown into panic and experienced unprecedented swings, and the stabilizing force was the $60 billion currency swap signed between the Bank of Korea and the Federal Reserve System (the Fed). A total of $19.872 billion was supplied domestically through that arrangement. In principle, that means even more dollars, or $26.5 billion, could flow into Korea this time.
The size of SK hynix’s fundraising is about 73% of Korea’s trade balance surplus in June, which came to roughly $36.2 billion. It is comparable to the average daily spot won–dollar trading volume in the first quarter of this year, which the Bank of Korea put at $33.28 billion. It is also nearly twice the roughly $13.6 billion in net dollar sales that the foreign exchange authorities made in the market in the first quarter to defend the won. Even the company’s currently planned domestic investments already exceed the amount raised through the ADR.
The market expects SK hynix to post operating profit of around 30 trillion won this year, and once cash generated from operations is added, its investment capacity in AI semiconductors is expected to expand even further.
pride@fnnews.com Reporter