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UBS: Buy SK Hynix's Upcoming ADR, Sell Its Seoul-Listed Shares

On July 7, UBS Group stated that investors should buy the American Depositary Receipts (ADR) planned for issuance by SK Hynix and sell the South Korean-listed shares of the chip manufacturer, as the former may trade at a premium. The sales and trading department of the Swiss bank noted in a report to clients that these ADRs could be more attractive to investors like hedge funds, as they offer higher efficiency and lower costs. The report also mentioned that some global portfolio managers who do not hold the Seoul-listed shares may also be able to purchase these U.S. securities. 'Going long on its ADR from day one and shorting its Korean stock seems like a no-brainer,' the UBS report stated. 'Given that the ADR discount phenomenon is unlikely to occur, the risks are very limited, making this a trade that can be executed on a large scale.'

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