SK Hynix Is Today’s Standout Chip Stock for an Unusual Reason

SK Hynix’s U.S.-listed stock was rising early on Friday. The South Korean memory-chip maker was trying to stage a comeback and might have been helped by the absence of trading in its home market.

SK Hynix’s American depositary receipts were up 4.4% at $159 in morning trading, making it the biggest gainer among large semiconductor companies.

To be fair, it has more ground to make up than most, having dropped 14% the previous day. But it might have been helped by the fact the Korean market was closed for a holiday Friday, allowing American investors to bargain hunt in the ADRs without concerns about what happened with the underlying stock overnight.

SK Hynix has been notably volatile following its blockbuster listing of ADRs on the Nasdaq market. Part of the reason is that Korean retail investors have been piling into SK Hynix and other technology stocks for much of the year, with increasing use of aggressive tools such as leveraged exchange-traded funds.

As 10 ADRs represent one share of SK Hynix, the current price suggests American investors are valuing the company at $1,567.90 a share—or a 27% premium to the South Korean shares. ADRs can trade at a significant premium to the underlying shares, due to the size of the U.S. investor base and obstacles to converting between the two instruments.

Barron’s has written positively about the ADRs, suggesting they offer a cheaper way to play the memory-chip boom than U.S. company Micron Technology. SK Hynix ADRs traded at a forward price-to-earnings ratio of 5.71 times as of Thursday’s close, according to FactSet, compared with 5.93 times for Micron.