Capital exodus hits Kospi after SK hynix's blockbuster Nasdaq debut

SK hynix's blockbuster Nasdaq debut sparked a rush for the exits in Seoul, defying expectations that the landmark U.S. listing would lift its domestic shares. Foreign and institutional investors offloaded the stock, while retail investors — the backbone of the latest rally — are increasingly shifting their attention to the chipmaker's U.S.-listed shares.

The debut failed to lift its Seoul-listed shares, as investors locked in profits amid uncertainty over the hefty premium on its American depositary receipt (ADR). An analyst report forecasting that the chipmaker’s second quarter earnings would miss consensus estimates added to the selling pressure.

Despite its splash on the Nasdaq on Friday — the second-largest U.S. listing on record after Elon Musk’s SpaceX — SK hynix shares closed down 15.37 percent at 1.85 million won ($1,230) in Seoul on Monday. The selloff was largely led by foreign and institutional investors, who offloaded 1.41 trillion won and 1.47 trillion won, respectively, according to the Korea Exchange.

The sharp decline stood in stark contrast to the ADR's 13 percent surge in its Wall Street debut on Friday, where it closed at $168, implying a substantial premium over the Seoul-listed shares, with each ADR representing one-tenth of a common share. The sell-off also ran counter to expectations that the Seoul-listed shares would be rerated as the Nasdaq listing improves access for foreign investors.

"It's common on the first trading day for investors to rotate out of the Korea-listed shares and into the U.S.-listed ADR, making the selloff largely a flow-driven move," said Hwang San-hae, a market analyst at LS Securities. “Because the market is still discovering the appropriate premium, volatility could increase in the early stages.”

A pessimistic outlook for the chip giant also spread negative sentiment. SK hynix is projected to fall 8 percent short of its second quarter operating profit consensus, according to a report from Korea Investment & Securities on Monday.

The brokerage forecast the chipmaker to log 60.4 trillion won in profit in the April-to-June period, falling short of the 65 trillion won consensus estimate. It attributed the shortfall to SK hynix’s heavier reliance on high bandwidth memory (HBM), which is expected to result in slower average selling price growth.

"Starting in the third quarter, when HBM4 enters full-scale mass production and shipments, we expect average selling prices [ASP] to increase at roughly the market average," said Choi Min-sook, an analyst at Korea Investment & Securities. "We estimate that dynamic random-access memory and NAND ASPs in the second quarter rose by about 30 percent and 50 percent, respectively, from the previous quarter."

The brokerage further cut the chip giant’s 2026 and 2027 operating profit estimates by 9 percent and 11 percent, respectively, not because of weaker earnings prospects but to reflect more realistic pricing assumptions based on long-term supply agreements that have already been signed.

Amid the concerns, retail investors who have been the main drivers of the Kospi rally are rethinking their exposure to Korea. Investor deposits, a gauge of cash waiting on the sidelines to enter the stock market, fell to 107 trillion won as of July 9, roughly down 30 trillion won from the end of last month.

“The anticipation of flow-driven catalysts, including the ADR listing and leveraged exchange-traded funds, had helped Korean semiconductor stocks decouple from the lackluster performance of their U.S. counterparts since May,” LS Securities' Hwang said. “Now that those expectations are fading, the sector is beginning to trade more in sync with the U.S. market."

Despite the major sell-off, some analysts remain optimistic.

SK hynix's ADR is the first real test of whether the market will revalue a Korean memory chipmaker as a U.S.-listed AI infrastructure asset, according to Kim Doo-un, a senior analyst at Hana Securities.

"If the ADR premium holds and memory earnings remain intact, the recent pullback should be viewed not as the end of the bull market but as a pause before a second upswing,” Kim said.

While the stock sank, SK hynix’s U.S. listing is expected to bolster the won, providing relief for one of the Korean authorities’ biggest economic headaches.

The chip giant said part of the $26.5 billion in proceeds it raised from ADR will be invested in Korea. In a regulatory filing for the ADR last month, SK hynix said the proceeds will be used to build chip fabrication plants in Yongin, Gyeonggi, an advanced packaging fab in Cheongju in North Chungcheong and to purchase chipmaking equipment such as extreme ultraviolet scanners.

The dollar inflow exceeds the $19.87 billion currency swap line Korea secured from the United States during the 2020 pandemic crisis and is nearly double the roughly $13.6 billion the foreign exchange authorities sold in the market in the first quarter to support the won.

The local currency was trading at 1,503.4 won against the dollar at 3:30 p.m on Monday, compared to 1,501.4 won from the previous session.

"Although the size and timing of the currency conversion have yet to be determined, the inflow is expected to have a significant impact on foreign exchange market supply and demand," said Park Seok-hyun, the deputy head of the wealth management products division at Woori Bank, deviating from many exporting firms at times of foreign exchange volatility with "plans to repatriate a substantial portion of the proceeds for domestic investment rather than hold them in U.S. dollars."

BY JIN MIN-JI [[email protected]]