(July 3): South Korea’s won strengthened after a person familiar with the matter said the nation’s officials were preparing for currency flows related to SK Hynix Inc’s offering of American depositary receipts.
The chipmaker is expected to begin using forwards as soon as Friday to hedge flows that will stem from its US$29 billion ($37.41 billion) ADR listing, which will settle on July 14, according to the person who asked not to be identified because the matter is confidential. While the ADRs are denominated in US dollars, SK Hynix has said it intends to bring back some of the funds raised from the listing to invest in Korea, which means it will need to buy won.
“The government appears to be paying close attention to exchange-rate stability, so I think the company may cooperate by bringing dollars into the country,” said Park Sang-hyun, an economist at iM Securities Co. Still, exactly how much will be converted is ultimately up to SK Hynix, he said.
“In terms of size, it’s certainly meaningful. The US$29 billion figure is equivalent to roughly one month’s worth of foreign net selling.”
The won gained 0.5% to 1,530.50 per dollar Friday after weakening as much as 0.7% earlier. The currency remains one of Asia’s worst performers this year, having depreciated more than 5%.
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Overseas investors sold a net US$30.5 billion of shares in the Kospi index last month, according to data from Korea Exchange.
A spokesperson for SK Hynix said the company was considering various options, but refrained from confirming details.
SK Hynix is tapping US investor demand for high-flying memory-chip stocks and has announced construction projects at home in Korea. Inbound investment of such a scale would be a rare source of support for Korea’s beleaguered currency.
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