Overnight stock-price movements loom larger after SK hynix’s U.S. listing

[Financial News]  Analysts say SK hynix’s listing of American depositary receipts (ADRs) in the United States has added to the stock-price factors Korean investors need to consider. Prices set during U.S. trading hours appear to have a relatively large effect on the company’s Korean ordinary shares the following day. The analysis cautions that, alongside the positive effect of broadening its overseas investor base, the listing could also increase the burden on Korean investors of responding to overnight price movements.
According to a report titled “The Korean Stock Market Held Hostage,” released on the 12th by Research Al-eum, an analysis of the share-price sensitivity between SK hynix’s U.S. ADRs and its Korean ordinary shares found that price changes in the U.S. market were reflected in Korean share prices to a degree more than twice as high as in the opposite direction.
An analysis of 57 observations from July 13 to October 8 found that a 1% rise in the U.S. ADRs was associated with an average 0.605% rise in the ordinary shares on the next Korean trading day. By contrast, when the Korean ordinary shares rose 1%, the subsequent gain in the U.S. ADRs averaged just 0.274%.
In other words, share-price sensitivity from the U.S. to Korea was about 2.2 times that in the opposite direction. The R2 values for price changes in the two markets also showed a sharp contrast: 35.5% for the relationship from the U.S. to Korea, far above 7.06% in the opposite direction.
One point to watch is the position of Korean investors. When prices set in the U.S. market are reflected after the Korean market opens, Korean investors may have to assess overnight price movements and respond to them on the next trading day. This means that increased volatility in the U.S. semiconductor sector could also affect the Korean ordinary shares.
Trading volume is also noteworthy. According to the report, U.S. ADRs account for about 2.5% of all SK hynix shares, but their trading value was found to reach 83% of that of the Korean ordinary shares. This offers a measure of how much price signals from overseas markets can influence domestic share prices.
The analysis suggests that the effects of SK hynix’s overseas listing cannot be assessed solely in terms of raising funds or expanding global investors’ access. Because investors at home and abroad respond to prices formed during different trading hours, price linkages between markets could emerge as a new factor in investment decisions.
However, the difference in share-price sensitivity alone does not prove that the U.S. market unilaterally determines the prices of the Korean ordinary shares. Common factors, including the different trading hours of the two countries’ stock markets, global semiconductor industry conditions and exchange rates, may also have an effect.
Choi Seong-hwan, a researcher at Research Al-eum, noted, “Despite the limited share of SK hynix stock issued as U.S. ADRs, price changes in the U.S. market may be closely linked to short-term price formation in the Korean ordinary shares.” He added, “Ultimately, SK hynix’s U.S. ADR listing has broadened its overseas investor base while also adding to the price factors Korean investors need to watch,” and further said, “How long the price link between the U.S. market and the Korean ordinary shares lasts is expected to be a key point for investors to watch.” 


[email protected] Kim Gyeong-a Reporter