SK Hynix's US IPO puts focus on memory stocks

SK Hynix begins trading on the NASDAQ on Friday.
SK Hynix reaps $26.5 billion after selling nearly 178 million shares at $149.
Analysts expect a rally as the secondary listing was oversubscribed at least seven times.
Competitors Micron and Sandisk opened lower on Friday.

Clay Webster FXStreet

There have been two competing theories on how Friday's SK Hynix US debut will affect the two leading US memory chip stocks, Sandisk (SNDK) and Micron (MU).

The first posits that investors will sell some of their holdings in the US companies in order to include the South Korean competitor. The second views the three as similar horses that should all benefit from the ongoing global memory shortage that has provided the sub-sector of the semiconductor industry with exploding margins and profits.

The first theory seems to be the leading contender on Friday as SK Hynix is set to begin trading under the ticker SKHY sometime during the regular session. Both Micron and Sandisk shed some weight in the early going on Friday.

The broader market is waxing and waning between positive and negative territory as the NASDAQ Composite and Dow Jones Industrial Average both search for direction.

SK Hynix prices US IPO

On Thursday, SK Hynix sold 177.9 million American Depositary Receipts (ADRs) for $149 apiece, raising $26.5 billion in the process. The secondary listing was oversubscribed by between seven and eight times over, depending on who you ask. And that is why leading market observers are expecting an immediate rally.

SK Hynix is a leading supplier of high-bandwidth memory (HBM) to Nvidia (NVDA) and other players in the AI data center buildout. SKHY holds approximately 32% of the dynamic random access memory (DRAM) market and around 57% of the HBM market.

"This could mean that ‌the ADR trades at a premium to the local shares, but more importantly it could help re-rate the Korean-listed SK Hynix shares, which are currently trading at a PE discount to Micron (MU), whereas we think SK Hynix should trade at least on par with Micron’s valuation," Sam Konrad, investment manager for Asia equity income at Jupiter Asset Management in Singapore, told Reuters.

Much of the funding acquired from the US listing will be used to break ground on two new fabs in its home country.

XLK (candles), SNDK, MU, KOSPI performance YTD

Author

Clay Webster

FXStreet

Clay Webster grew up in the US outside Buffalo, New York and Lancaster, Pennsylvania. He began investing after college following the 2008 financial crisis.

GBP/USD recedes from tops around 1.3450

GBP/USD holds on to moderate gains above 1.3400 the figure on Friday. Optimism surrounding the UK government’s leadership transition and expectations of further BoE tightening support the British Pound, while easing tensions in the Middle East and fading Fed rate-hike expectations weigh on the US Dollar.

EUR/USD flirts with daily lows near 1.1420

EUR/USD struggles to build on Thursday's gains and trades with marginal losses near 1.1420 at the end of the week. With no major economic data due, lingering uncertainty over the US-Iran conflict keeps investors cautious, limiting the pair's upside.

Gold resumes the downside, hovers around $4,100

Gold struggles to extend Thursday’s rebound and trades in a narrow range around the $4,100 yardstick per troy ounce on Friday. Uncertainty surrounding the Middle East conflict limits the precious metal’s upside, which is also under pressure amid rising US Treasury yields across the curve.

Week ahead – US CPI and Warsh testimony to take centre stage, BoC eyed too

US inflation report and Warsh testimony to headline the week. Dollar to dominate amid slew of other US data and Mideast tensions. Amid fresh Iran escalation, China GDP to shed light on Q2 impact. Bank of Canada not expected to follow RBNZ with rate hike.

Five sessions, one round trip: Why the whipsaw is exactly what Warsh ordered

Markets opened July with a December hike as the base case and spent five trading sessions unlearning and relearning it. A 57K payrolls print bled the tightening bets out of the strip; a re-shut Strait of Hormuz is pushing them back in. Wednesday's minutes from the June Federal Open Market Committee meeting landed mid-round-trip, describing a world that had already stopped existing.

Five sessions, one round trip: Why the whipsaw is exactly what Warsh ordered

Markets opened July with a December hike as the base case and spent five trading sessions unlearning and relearning it. A 57K payrolls print bled the tightening bets out of the strip; a re-shut Strait of Hormuz is pushing them back in. Wednesday's minutes from the June FOMC meeting landed mid-round-trip, describing a world that had already stopped existing.