SK Hynix successfully listed its American Depositary Receipts (ADRs) on Nasdaq, raising a significant $29 billion according to some sources, though other reports indicate $26.5 billion. This massive dollar inflow, scheduled to be applied to the company on July 14, has prompted the South Korean government to prepare for substantial currency shifts. The won, which had been under pressure due to capital outflows and a stronger dollar, saw a rebound on Friday, rising 0.5% to ₩1,530.50 per dollar, recovering from an earlier 0.7% drop, as market participants began selling dollars forward in anticipation of the conversion.
The proceeds from the ADR issuance are primarily earmarked for domestic projects by SK Hynix, including a semiconductor cluster in Yongin and an advanced packaging factory in Cheongju, as well as the procurement of EUV lithography equipment. This domestic investment focus means that a substantial portion of the dollars will need to be converted into won, creating a large-scale dollar supply injection into the Korean foreign exchange market. Analysts expect the actual conversion to occur in tranches from late July through September to minimize market disruption.
The scale of this dollar inflow is significant. At $26.5 billion or $29 billion, it surpasses the $19.87 billion actually supplied to the domestic market during the 2020 COVID-19 currency swap arrangement between the Bank of Korea and the US Federal Reserve, which was a $60 billion facility. The amount also represents approximately 73% of South Korea's June trade surplus of $36.2 billion and is nearly double the $13.6 billion in dollars monetary authorities net-sold in the first quarter of this year to defend the exchange rate. This influx is seen as a crucial opportunity to stabilize the won without direct government intervention.
Market experts like Park Sang-hyun of iM Securities Co. noted the government's close attention to exchange-rate stability, suggesting cooperation between SK Hynix and authorities to manage the dollar inflow. The anticipation of this large dollar supply, particularly through forward selling by SK Hynix to hedge currency risk, has already influenced the market, contributing to the won's recent strengthening and prompting long-dollar position unwinding. While the exact scale and timing of the conversion remain unfinalized by SK Hynix, the impact on the foreign exchange market is expected to be substantial.
