In just three days! SK Hynix ADR's premium over Korean domestic stocks has expanded to 51%, with top institutions collectively bullish

According to Zhitong Finance APP, SK Hynix (SKHY.US) American Depositary Receipts (ADR) surged over 27% on Tuesday, not only fully recovering the 9.3% decline from the previous trading day caused by a record sell-off in the South Korean stock market spreading to the U.S. market, but also pushing the premium of the stock to 51% compared to its common shares listed in Korea, just three days after its debut on the U.S. stock market, far exceeding the approximately 3% issuance premium during last week's initial public offering (IPO). Due to restrictions on converting South Korean common shares to U.S. ADRs, the market had previously anticipated that the price of SK Hynix ADR would be higher than its corresponding stock price in the Seoul market.

The significant rise in SK Hynix ADR on Tuesday coincided with the official trading of the stock's options on the U.S. options exchange, allowing traders in the world's largest derivatives market to participate more easily in the trading of this volatile South Korean memory chip manufacturer.

As of Tuesday's early trading session in the U.S. stock market, the trading volume of SK Hynix ADR options had reached approximately 33,000 contracts, with more than two-thirds being short-term options expiring this Friday. The most actively traded was the call option with a strike price of $185, with a volume of about 2,900 contracts; the put option with a strike price of $145 followed closely behind. Additionally, the call option expiring in August with a strike price of $200 was also in high demand, with a trading volume exceeding 1,500 contracts.

Daniel Kirsch, head of options at Piper Sandler, stated that investors are expected to primarily focus on short-term trading opportunities for SK Hynix ADR to continue rising this week. He noted that with the official listing of SK Hynix ADR options, retail investors are expected to rush in quickly, making the short-term call options expiring this Friday potentially the most popular trading products.

The expansion of the premium is related not only to the rise of SK Hynix ADR itself but also to the recent pullback of SK Hynix's common shares listed in South Korea. After SK Hynix completed its U.S. listing last Friday, a valuation liquidation triggered by extreme positions, leveraged funds, profit-taking, and declining earnings expectations led to a record single-day drop of over 15% in SK Hynix's common shares in Korea on Monday.

In addition to profit-taking factors, a report released by the local brokerage Korea Investment & Securities (KIS) on Monday was seen as a catalyst for the sharp decline in SK Hynix's stock price. Although KIS's forecast for SK Hynix's second-quarter performance was quite bright, the operating profit forecast it provided was about 8% lower than the market consensus expectation of 65 trillion Korean won. This ignited investor concerns. However, the brokerage also stated that this was merely a normalization adjustment of the earnings forecast after considering the long-term supply agreements (LTAs) for high bandwidth memory (HBM), and it did not imply a slowdown in industry growth.

Some analysts pointed out that compared to its peers, SK Hynix has a higher revenue proportion from high bandwidth memory (HBM), while the average selling price (ASP) increase is lower than the industry average. HBM prices are typically locked in through long-term supply agreements, so they do not fluctuate significantly with market conditions in the short term. In contrast, when the overall market price rises, traditional DRAM and NAND products tend to see a larger increase in average selling prices The KIS index indicates that while long-term supply agreements limit price volatility, they also enhance profit stability and reduce the long-standing volatility in the memory industry. In the future, the market's valuation logic for storage companies will be reshaped, focusing more on the sustainability of profits rather than short-term profit scale.

Although KIS remains optimistic about SK Hynix and emphasizes that its latest report does not imply a deterioration in corporate profits or a slowdown in industry growth, investors are highly sensitive to the second quarter operating profit being "below market expectations," leading to a sell-off of SK Hynix shares on Monday.

From a technical perspective, this round of sharp decline has pushed SK Hynix's common stock listed in South Korea into the oversold territory. Some analysts believe that a short-term buying opportunity is forming, especially as the stock price has fallen nearly 40% from its high. MRM Research senior analyst Nico Rosty stated that the price of SK Hynix's common stock listed in South Korea currently shows "deeply oversold" characteristics, noting, "It is possible to drop for another week, but we see it as a significant accumulation/increase opportunity. A rebound in the Korean market should drive ADRs to rise more significantly, making this a good buying opportunity."

Additionally, major Wall Street firms such as Bank of America and Nomura, along with top market research institutions like SemiAnalysis, believe that the recent global decline in memory chip stocks and even AI computing infrastructure investment themes is closer to extreme expectations, extreme leveraged positions, and concentrated liquidations of overly crowded bullish positions, rather than a sudden collapse in industry demand. The profit-taking of SK Hynix's U.S. stock, the valuation misalignment between domestic Korean stocks and American Depositary Receipts, and the concentrated liquidation of leveraged funds have all amplified price volatility.

SemiAnalysis expects that the comprehensive average selling price (ASP) of SK Hynix's DRAM in the second quarter of 2026 will surge approximately 45% quarter-on-quarter, with DRAM project operating profits reaching 55 trillion won, and the company's operating profit margin expected to reach a historical high. The SemiAnalysis report clearly states, "Be Greedy When Others Are Fearful," emphasizing that despite recent severe fluctuations in memory chips causing investor concerns, SK Hynix and other leading memory companies "remain one of the most attractive targets in the semiconductor industry in terms of risk-reward ratio."