SK Hynix to Inject 'Currency Swap-Level' Dollar Liquidity into Foreign Exchange Market

As SK Hynix, which successfully listed on the U.S. Nasdaq, is expected to inject a massive amount of dollars—comparable to a currency swap—into the Korean foreign exchange market, analysts suggest it will provide much-needed relief to the market.

On the 10th, SK Hynix raised approximately 26.5 billion dollars through the issuance of American Depositary Receipts (ADRs). The proceeds from the public offering are scheduled to be deposited to SK Hynix on the 14th, when the offering process concludes.

Considering that SK Hynix plans to use most of these funds for domestic investments, such as the Yongin Semiconductor Cluster, the Cheongju P&T7 advanced packaging plant, and the acquisition of extreme ultraviolet (EUV) lithography equipment, a large portion of these dollars will be converted into Korean won. This signifies a massive supply of dollars into the Korean foreign exchange market.

An official from SK Hynix stated, "We plan to use the ADR funds for the investments disclosed in the securities registration statement and will convert a portion of them into won for execution," adding, "The scale and timing of the currency exchange have not yet been finalized."

The market anticipates that this large-scale dollar inflow will act as a factor to stabilize the exchange rate, which has been on an upward trend for a considerable period.

In fact, even before the ADR issuance was finalized, the foreign exchange market saw forward exchange selling, which helped the won-dollar exchange rate, previously hovering around 1,560 won during trading, to pull back into the 1,400 won range.

The scale of the incoming dollars is being described as being at a "currency swap level."

The amount raised by SK Hynix is equivalent to approximately 73% of South Korea's trade surplus of 36.2 billion dollars in June.

Unlike many companies that retain a significant portion of the dollars earned from exports to fund other overseas investments, the funds from this SK Hynix listing are intended for domestic investment, meaning actual currency conversion will take place.

The securities industry projects that the company will generate an operating profit of around 300 trillion won this year. Therefore, when combined with the cash secured from future operating activities, the capacity for investment in AI semiconductors is expected to expand further.

The prevailing view is that the actual currency conversion will begin between the second half of July and August or September, following the deposit of the public offering proceeds.

Kwon Ah-min, an analyst at NH Investment & Securities, said, "Currency conversion is expected to begin from the middle to the latter part of this month," adding, "While the company will sequentially sell dollars to secure the won needed for domestic facility investments, not all of the raised funds will be converted into won, as there are areas requiring foreign currency payments, such as the purchase of equipment from ASML in the Netherlands."

(Photo: Courtesy of Nasdaq, Yonhap News)
※ Please note: This article was translated by AI and may contain errors.