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SK hynix Nasdaq ADR listing seen as potential support for won amid prolonged weakness
SK hynix headquarters in Icheon, Gyeonggi Province, May 26 / Yonhap
By Jun Ji-hye
SK hynix’s planned American depositary receipt (ADR) listing on the Nasdaq next month is drawing attention as a potential catalyst for easing the won’s prolonged weakness, with the won-dollar exchange rate having remained above the 1,500 won level for nearly a month.
Market experts estimate the listing could bring in as much as $30 billion to Korea. Should those funds be converted into won, the resulting increase in dollar supply could help ease upward pressure on the exchange rate and support the local currency.
The major chipmaker’s board approved the issuance of new shares for the ADR offering and the Nasdaq listing last Thursday. The ADRs are scheduled to begin trading on July 10, with the subscription and settlement set for July 14.
ADRs allow shares of foreign companies to be traded on U.S. stock exchanges, improving access for global investors.
SK hynix plans to issue as many as 17.79 million new shares, or about 2.5 percent of its outstanding stock, as part of the Nasdaq ADR listing. Based on the company’s closing share price before the board approved the transaction, the offering could raise about 45.45 trillion won ($29.4 billion).
The final deal size will depend on demand from overseas institutional investors during the book-building process, leaving room for the offering to exceed current estimates if investor appetite proves strong.
The plan comes at a time when the won continues to underperform despite strong exports and the ceasefire agreement between the United States and Iran.
The won closed at 1,542.7 per dollar in onshore trading on Thursday, marking a second consecutive session finish in the 1,540 won range. This was the highest closing level since March 2009, during the global financial crisis.
During Friday’s session, the exchange rate briefly climbed toward 1,550 on renewed dollar strength, before reversing late in the day and closing in the 1,530 won range on what market participants attributed to suspected intervention-related dollar selling by authorities.
The persistently elevated exchange rate is leaving market participants watching closely for whether funds raised through SK hynix’s ADR listing will be converted into the local currency after flowing into Korea.
In the structure of the transaction, U.S. investors purchase the ADRs in dollars, giving SK hynix access to foreign currency proceeds. Should those funds later be deployed for domestic facility investment and converted into won, the process would increase dollar supply in the Seoul foreign exchange market, potentially easing pressure on the won-dollar rate.
The company said in its disclosure that the proceeds will be used for facility investment, implying that at least part of the funds may ultimately be brought to Korea and converted into won.
“If proceeds raised through ADR issuance are fully brought back into Korea, they would be supportive for the won,” said Seo Jeong-hoon, a senior researcher at Hana Bank. “However, if a significant portion of the funds is instead reinvested overseas rather than converted into won, the impact on the currency would be limited.”
He also noted that continued net selling by foreign investors could keep the won-dollar exchange rate from declining meaningfully in the near term.
The SK hynix ADR listing has also raised expectations that other large-cap Korean companies, including Samsung Electronics, may consider similar funding strategies.
In a report, KB Securities said investor interest in a potential U.S. ADR listing for Samsung Electronics has been stronger than expected during recent meetings with global clients.
“It could be a viable capital policy option to enhance access to global investors,” the brokerage said.