SK Hynix American Depositary Receipts (ADRs) are trading at prices nearly 50% higher than their domestic shares, prompting warnings from U.S. financial experts about the unusual investment behavior of South Korean individual investors.
According to Yonhap Infomax on July 24, Owen Lamont, a portfolio manager at Acadian Asset Management and an authority on behavioral finance, stated in a recent report that "the price difference between the same company's stock in the U.S. and Korea has widened too much," indicating a potential sign of market overheating.
Indeed, since its U.S. listing, SK Hynix ADRs have traded at prices up to 49% higher than their domestic counterparts. In contrast, KB Financial and Shinhan Financial ADRs show little price difference compared to their domestic stocks, while the premium for Taiwan's TSMC ADR is around 15%.
Lamont particularly noted the buying spree among South Korean individual investors. According to the Korea Securities Depository, domestic investors had net purchased approximately $500 million (about 690 billion won) worth of SK Hynix ADRs by July 17.
He remarked, "In Korea, you can buy the same stock for $100, but in the U.S., it costs $149," calling it an economically difficult investment to justify.
Lamont explained that this price discrepancy resembles phenomena observed during the dot-com bubble in 2000, when Indian IT company Infosys ADRs traded at much higher prices than their domestic shares before returning to normal levels as the bubble burst.
Market analysts predict that the price difference may narrow once the conversion of domestic shares to ADRs begins on July 29. However, they caution that the complex conversion process and regulatory issues may hinder immediate resolution of the price gap.
Lamont also warned that if the market cannot correct such a clear price discrepancy, it raises concerns about potential bubbles in other assets. He noted that the increasing trend of foreign companies listing ADRs in the U.S. often occurs at market peaks, suggesting that if other Asian companies like Samsung Electronics or Japan's Kioxia follow suit, careful monitoring of market overheating will be necessary, as reported by Yonhap Infomax.
* This article has been translated by AI.
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