SK hynix’s Landmark Nasdaq Listing Alleviates Korea’s Foreign Exchange Pressures

Editorials

SK hynix’s record Nasdaq ADR offering could ease dollar pressure, strengthen the won and give Korea room to rebuild foreign exchange reserves.

SK hynix’s American depositary receipts (ADRs) made a successful debut on the Nasdaq last week, with investor demand pushing the valuation above the company’s domestic share price and allowing the chipmaker to raise $26.5 billion in the United States. The offering stands as the largest ever by a foreign issuer in U.S. market history, highlighting the growing prestige of Korean corporations.

The listing is also poised to relieve pressure on South Korea’s foreign exchange market, which has been strained by a robust dollar and increased outbound investment by local investors. Most of the proceeds are earmarked for domestic investment, leading analysts to forecast dollar inflows akin to a major currency swap facility.

For context, during the 2020 COVID-19 economic shock, Korea arranged a $60 billion swap line with the U.S. Federal Reserve, though only $19.87 billion was drawn down. SK hynix’s $26.5 billion haul surpasses that drawn amount and nearly doubles the $13.6 billion net sold by authorities in the first quarter to defend the won.

Anticipation of these dollar inflows has already moved markets: last week, the USD-KRW rate slipped into the 1,400-won band.

The resulting stability offers a window to replenish Korea’s foreign reserves, which totaled $427.36 billion at end-June. The nation slipped from 9th to 13th globally in reserves between December and May, reflecting repeated intervention to stem exchange-rate spikes. As reserves thinned, investors grew skeptical of authorities’ capacity for aggressive action.

While buying dollars is expensive at high rates, sustained won strength may compel regulators to perform smoothing operations to mitigate excessive appreciation from the ADR proceeds. Additionally, with Korea’s FX market transitioning to 24-hour weekday trading, a robust reserve buffer is essential to absorb shocks.

Seoul should capitalize on the opening created by SK hynix’s listing rather than let it pass unused.

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