Surges 7% to close at $198.63

Up 33% from IPO price of $149

Reflects expectations of prolonged memory chip shortage

SK hynix [WSJ]
SK hynix [WSJ]

SK hynix's American depositary receipts surged 7 percent, hitting their highest level since the company's shares began trading on the NASDAQ on July 10.

SK hynix's ADR closed at $198.63 on Wednesday (local time), up 7.05 percent from the previous session. The stock touched an intraday high of $199.87. The closing price marked a 33 percent gain from the IPO price of $149.

SK hynix's ADR shares have risen for three consecutive trading days since Friday, a trend attributed to expectations that the memory chip supply shortage will persist for now.

The Philadelphia Semiconductor Index also gained 0.37 percent, extending its winning streak to five consecutive trading days. Micron Technology rose 2.75 percent as well.

UBS analyst Timothy Arcuri forecast that shortages of both DRAM and NAND flash chips would continue through 2027.

Dan Kim, chief strategy officer at research firm TechInsights, rated the current overheating in the memory chip market as an "8 out of 10." He added that the market would likely stay at that level at least until the end of 2027.

Some market observers noted that memory chip inventories have fallen to less than 10 days' worth of supply.

Bank of America upgraded its rating on SK hynix's ADR to "buy" and set a target price of $250.

Eric Diton, president of Wealth Alliance, compared today's semiconductor industry to "picks and shovels during the gold rush." He said investors would struggle to find a better option than semiconductors in the current market.

However, SK hynix's common shares were trading weak on the domestic market Thursday. As of 9:35 a.m., the shares were changing hands at 1.85 million won ($1,380), down 0.3 percent from the previous session's close. The decline was attributed to a weak start for the Kospi on "quadruple witching day" — when futures and options contracts expire simultaneously. It was also compounded by a downturn on Wall Street driven by rising international oil prices and US government bond yields.

Selling pressure on SK hynix tied to the regular rebalancing of the KRX Semiconductor Index was also cited as a reason for the price pullback Thursday. That selling pressure stems from the index's cap on individual stock weightings — the KRX Semiconductor Index limits any single stock's weighting to 20 percent, requiring rebalancing to trim the weighting of stocks that exceed the cap.

According to Mirae Asset Securities, SK hynix's weighting in the KRX Semiconductor Index stood at 36.75 percent as of Friday, exceeding the 20 percent cap. This was estimated to trigger about 1.24 trillion won in selling pressure on SK hynix shares.

Yoon Jae-hong, a researcher at Mirae Asset Securities, said trading to reflect the index rebalancing would take place near Thursday's closing price, adding, "Stocks with a large estimated trading amount relative to their average trading value could see increased volatility just before the market closes."


yuni@heraldcorp.com