SK Hynix ADR Still Trades at 10% Premium as $4.5 Billion Flows into US Stocks from South Korean Retail Investors

BlockBeats News, August 18th, South Korean retail investors are currently moving funds from the domestic stock market to the U.S. market. Data from a South Korean securities depository institution shows that South Korean investors net bought approximately $4.5 billion U.S. stocks in July, with about $840 million flowing into SK Hynix's U.S. listed ADR, making it one of the most purchased U.S. securities by South Korean investors.

It is worth noting that South Korean investors could have directly bought SK Hynix in the Korean market but chose to purchase its U.S. ADR, leading to a significant price disparity between the two markets. Currently, SK Hynix's ADR trades at a premium of about 10% compared to the Korean domestic stock, and the U.S. listed stock has higher volatility. Owen Lamont, Senior Vice President of Acadian Asset Management, believes that this rare price difference may be an indication of over-speculation in the market, possibly even a symptom of a "bubble."

The shift of South Korean retail investors to U.S. stocks has not reduced their risk appetite, with AI, semiconductors, and high-leverage products still being core bets. Among the top 10 U.S. stocks most purchased by South Korean investors in July, 4 were leveraged products, with the Direxion Daily Semiconductor Bull 3X Shares ETF (SOXL) being the most popular.

Meanwhile, the outstanding balance of margin loans in the South Korean stock market has decreased from approximately 37 trillion KRW at the end of June to around 27 trillion KRW in early August. Analysts point out that South Korean retail investors may have simply shifted high-risk AI trades that were originally conducted in the domestic market to the U.S. market, rather than truly exiting risk assets.

The industry believes that the size of South Korean funds is not enough to change the overall trend of the U.S. stock market, but their concentrated trading may further amplify the price fluctuations of high-volatility assets highly concentrated among retail investors, such as AI chips, quantum computing, and leveraged ETFs.