Key points
- SK Hynix's US shares (SKHY) closed Friday at $154.03, about 25% above the price of the same company in Seoul.
- The difference reached 51% on July 14; Korean media now calls it the "reverse kimchi premium."
- Barclays set a $330 target on SKHY; analysts say when the premium passes 25%, buyers usually turn to the cheaper Seoul shares.
There is a new phrase going around in Seoul's market news this weekend: the reverse kimchi premium. I want to explain it, because it is one of the stranger things happening in Korean markets right now, and it involves the most watched Korean stock in the world.
Years ago, the original "kimchi premium" meant Korean investors paying more than everyone else for bitcoin on Korean exchanges. Now it is running the other way. This time it is American investors paying more, and what they are paying more for is SK Hynix.
The same company, two very different prices
SK Hynix has traded on the Korea Exchange for decades, and since July 10 it also trades on the Nasdaq under the ticker SKHY. The US listing is an ADR, an American depositary receipt, which is a certificate that represents the underlying Seoul shares. In theory the two should cost about the same once you convert the currency. They do not.
On Friday, SKHY closed at $154.03 in New York, up 1.13% on a day when American chip makers mostly fell. The Seoul shares closed at 1,842,000 won. Convert the currency and compare the same slice of the company, and the New York price came out 24.6% higher, according to Yonhap Infomax data. In other words, an American investor on Friday paid about a quarter more for SK Hynix than an investor in Seoul paid for the exact same company (we wrote about this difference when it first appeared, and it has not gone away since).
At its widest, on July 14, the difference reached 51%. That was the day SKHY rose 27.29% to $193.92 while the Seoul shares could not keep up. Even after last week's heavy selling across memory stocks, which took SKHY down 13.69% in a single day on Thursday, the premium settled back near 25% and stayed there.
Why Americans pay more
Part of the answer is simple demand. The US listing is new, it is small compared to the Seoul float, and American investors who want the leading maker of AI memory chips in their own market finally have a direct way to buy it (here is how that works). A lot of money showed up at once: the listing was priced at $149 after demand ran seven times over the shares available, and the public paid $170 the very next day.
Seo Sang-young, a managing director at Mirae Asset Securities, pointed to the options market as the reason the premium held up last week. Options on SKHY only began trading July 14, trading concentrated in short-dated call options, and implied volatility climbed to around 172%. Friday was the first monthly options expiration, and he said SKHY became "a representative stock that directly benefited from the change in supply and demand around it" (translated from Korean). Dip buyers did the rest.
What it means for the Seoul shares
This is the part that matters most for the Korean market. Kim Jae-seung, an analyst at Hyundai Motor Securities, compared it to TSMC, whose US shares have traded above its Taiwan shares for years. The pattern there: when the US premium passes about 25%, global investors start buying the cheaper local shares instead. The premium works like an anchor from above, pulling the home market price up toward it.
Korea already saw a preview. On July 15, right after the difference peaked at 51%, the Seoul shares of SK Hynix rose as much as 13.49% during the day, and the Kospi rose with them to 7,424.18, briefly recovering the 7,000 level. The Seoul price was chasing the New York price. For a Korean market that spent the past two weeks falling, a 25% premium in New York is one of the few supports under the country's most important stock (SK Hynix's own chairman spent last week telling investors to simply hold on).
There is also a bullish voice on the US side. Simon Coles, an analyst at Barclays, put a $330 price target on SKHY in a recent report, more than double Friday's close. His argument is that the memory chip shortage gets worse in 2027 and improves only a little in 2028, and that memory stocks are, in his words, "excessively undervalued".
What happens Monday
A price difference like this usually closes one of two ways. Either the New York price comes down to meet Seoul, or the Seoul price climbs to meet New York. The TSMC history says the second one is more common, and that is the outcome the Korean market is quietly hoping for. The first hint comes at Monday's open in Seoul. After a long holiday weekend and all this attention on the premium, the first hours of trading will show which way it starts to close.
Sources
- Yonhap (Korean language), SK하이닉스 ADR, 美반도체 약세에도 본주 대비 '25% 프리미엄'
For why options pricing decays the way it does into expiration, see our explainer on max pain and theta decay.
This is general market commentary and opinion, not investment advice. Markets can go down as well as up, and you can lose money. Always do your own research and consider speaking with a licensed financial professional before making any investment decision.
