Only three days used! SK Hynix (SKHY.US) ADR's premium over South Korea's domestic stocks has expanded to 51%. Top institutions collectively advocate buying.

SK Hynix (SKHY.US) American Depositary Receipts (ADRs) surged more than 27% on Tuesday, not only completely recovering from the 9.3% drop caused by the record sell-off in the South Korean stock market spreading to the US market the previous trading day, but also pushing the stock's premium over its listing on the Korean stock exchange to 51% after just three days of trading in the US, much higher than the approximately 3% premium at the IPO last week. Due to restrictions on the conversion of South Korean common stocks to American ADRs, the market had previously expected SK Hynix ADR prices to be higher than their corresponding stock prices in Seoul. The surge in SK Hynix ADRs on Tuesday coincided with the official start of options trading for the stock on American options exchanges, allowing traders in the world's largest derivatives market to participate more easily in trading of this volatile South Korean memory chip manufacturer. As of Tuesday's US stock market open, the volume of SK Hynix ADR options traded had reached about 33,000 contracts, with over two-thirds of them being short-term options expiring this Friday. The most actively traded options were the call options with a strike price of $185, with a volume of approximately 2900 contracts; put options with a strike price of $145 followed closely. In addition, call options expiring in August with a strike price of $200 were also popular, with a volume of over 1500 contracts. Piper Sandler's head of options trading, Daniel Kirsch, expects investors to focus on short-term trading opportunities for continued upside in SK Hynix ADRs this week. He noted that with the official listing of SK Hynix ADR options, retail investors are expected to quickly enter the market, making the short-term call options expiring this Friday potentially the most popular trading instrument. The expansion of the premium is not only due to the rise in SK Hynix ADRs themselves, but also related to the recent pullback in SK Hynix's South Korean common stocks. Following SK Hynix's completion of its US listing last Friday, a valuation reassessment triggered by extreme positions, leverage funds, profit-taking, and declining profit expectations led to a record drop of over 15% in SK Hynix's South Korean common stocks on Monday. In addition to profit-taking factors, a report released by the South Korean brokerage firm Korea Investment & Securities (KIS) on Monday was seen as the catalyst for the sharp drop in SK Hynix's stock price. Although KIS's forecast for SK Hynix's second-quarter performance was impressive, the operating profit forecast provided by the firm was approximately 8% lower than the market consensus of 6.5 trillion Korean won. This triggered investor concerns. However, the brokerage firm also indicated that this adjustment was a normalization of profit forecasts considering the inclusion of long-term supply agreements for high-bandwidth memory (HBM), and did not imply a slowdown in industry growth. Some analysts pointed out that compared to peers, SK Hynix has a higher proportion of revenue from high-bandwidth memory (HBM), but the average selling price (ASP) has increased less than the industry average. HBM is usually locked in at a fixed price through long-term supply agreements, so prices do not fluctuate significantly with market trends in the short term. In contrast, when the overall market rises, traditional DRAM and NAND products have a higher average selling price increase. The KIS index shows that although long-term supply agreements limit the volatility of prices, they also increase profit stability and reduce the volatility of the memory industry. The future valuation logic for storage companies will be reshaped to focus more on the sustainability of profits rather than short-term profit levels. Although KIS remains optimistic about SK Hynix and emphasizes that its latest report does not signal a deterioration in the company's profits or a slowdown in industry growth, investors are extremely sensitive to the "below market expectations" of second-quarter operating profits, leading to a sell-off of SK Hynix shares on Monday. Technically, the recent sell-off has pushed SK Hynix's South Korean common stocks into oversold territory, and some analysts believe that a short-term buying opportunity is emerging, especially as the stock price has fallen by nearly 40% from its highs. MRM Research's senior analyst Nico Rossi stated that SK Hynix's South Korean common stock currently exhibits characteristics of "deep oversold" and while further decline is possible, they view it as a significant opportunity to increase holdings. A rebound in the South Korean market is expected to drive a larger increase in ADRs, making it a good time to buy. Furthermore, according to Wall Street giants like Bank of America Corp and Nomura, as well as top market research firms like SemiAnalysis, the recent global sell-off in storage chips and AI infrastructure investment theme stocks is more about extreme deleveraging and clearing out overleveraged and crowded long positions, rather than a sudden collapse in industry demand. The profit-taking after SK Hynix's US listing, the valuation discrepancy between South Korean local stocks and American ADRs, and the concentration of leveraged fund closures have all amplified price volatility. SemiAnalysis expects that in the second quarter of 2026, SK Hynix's DRAM average selling price (ASP) will increase by about 45% quarter-over-quarter, with DRAM operating profit reaching 5.5 trillion Korean won, and the company's operating profit margin reaching a historical high. The report emphasizes that although recent volatile fluctuations in memory chips have raised investor concerns, SK Hynix and other leading storage companies remain among the most attractive risk-reward bets in the semiconductor industry. "Be Greedy When Others Are Fearful," as stated by the SemiAnalysis report, highlights that despite recent concerns over storage chip volatility, SK Hynix and other top storage companies "are still one of the most attractive targets in the semiconductor industry in terms of risk-reward ratio."