SK Hynix ADR and Korean common stock to be open for conversion at month-end, but arbitrage trades expected to be difficult to execute

Odaily Odaily reports that the two-way conversion between SK Hynix ADR and its common stock listed in South Korea is expected to be opened by the end of this month, but the arbitrage trades anticipated by some individual investors are expected to be difficult to realize. Although the swap is possible in principle, investors may find it hard to execute conversions as freely as trading ordinary shares.

The Korea Securities Depository (KSD) stated on the 16th that the mutual conversion between SK Hynix ADR and Korean common stock will become possible after the 29th (the scheduled listing date for the newly issued common shares). However, the actual conversion process requires meeting several conditions. Converting Korean common stock into ADR is only possible within the ADR issuance limit set by the issuer. For example, if the ADR issuance limit corresponds to 1 million common shares and 900,000 have already been issued, only 100,000 shares are available for additional conversion. Conversely, converting ADR back into Korean common stock has no separate issuance limit.

Industry insiders believe that it will be difficult for individual investors to use this as a practical investment strategy. Converting common stock into ADR requires submitting a separate application through a brokerage firm and involves procedures such as foreign currency exchange. The processing methods vary among different brokerage firms, making it impossible to complete the conversion instantly via mobile or online trading systems like ordinary stock trades. (Jinshi)