SK hynix shares took a sharp hit on the Seoul Stock Exchange on Monday. Investors took profits following the South Korean memory chip manufacturer’s Nasdaq debut.
The stock lost as much as 13.2 percent on the Korea Exchange during the trading day. That decline followed immediately after the successful listing of American Depositary Receipts (ADRs) on the Nasdaq last Friday, Business Insider reports. ADRs are U.S. certificates that make foreign stocks tradable on a U.S. stock exchange. With its U.S. listing, SK hynix raised $26.5 billion, making the transaction one of the largest initial public offerings ever on the U.S. market.
The ADRs opened at $170 on Friday, well above the reference price of $149, and closed their first trading day with a gain of 12.8 percent. However, the sharp rise also prompted investors to take profits following the strong price rally of recent months.
Moreover, SK hynix’s price decline was not an isolated event. Rising tensions in the Middle East caused stock markets across Asia to fall. South Korea’s Kospi index fell by about 6 percent, while Samsung Electronics lost approximately 8 percent. Chip stocks were also under pressure in Japan. The Nikkei 225 closed about 2 percent lower, and Kioxia lost more than 11 percent.
Analysts remain positive
Despite the sharp correction, analysts see little reason to adjust their long-term outlook for SK hynix. The stock on the Korean exchange has still nearly doubled since the start of the year.
Morningstar estimates the fair value of the U.S. ADRs at $160 and values the South Korea-listed stock at approximately 2.4 million won. According to the analysts, this means the stock has largely reached its fair value.
According to Morningstar, the current recovery in the memory chip market is clearly stronger than previously expected. At the same time, the research firm still assumes that the market will eventually return to a more normal cyclical pattern. As a result, analysts consider the potential for further price increases from current levels to be limited.