'Market Cap Number 2' SK Hynix Left Out in the Bull Market

[Asia Economy Reporter Koh Hyung-kwang] While the domestic stock market continues its upward trend, SK Hynix, the second-largest company by market capitalization, is showing signs of being sidelined. Among the top 10 companies by market cap, SK Hynix is the only one whose stock price has declined this year. Despite recently announcing better-than-expected earnings, sustained selling pressure from foreign investors has prevented the stock price from gaining momentum.

According to the Korea Exchange on the 12th, SK Hynix was trading at 80,400 KRW on the KOSPI market as of 10:05 AM, down 1.1% from the previous trading day. This represents a 17.0% decrease compared to the year-end price of 94,100 KRW.

Among the top 10 companies by market capitalization on the KOSPI, SK Hynix is the only one with a negative return so far this year. The biotech giants Samsung Biologics (4th in market cap) and Celltrion (6th) have risen 85.7% and 73.4%, respectively, compared to the end of last year. The two major domestic portals, Naver (5th) and Kakao (9th), have also increased by 67.0% and 130%, respectively.

LG Chem (3rd) and Hyundai Motor (7th), whose stock prices had been stagnant, have shown a turnaround this year, rising 138% and 49.1%, respectively. Samsung Electronics, ranked first in market cap, has also been sluggish this year, but its closing price of 58,200 KRW yesterday represents a 4.3% increase from the beginning of the year (55,800 KRW).

SK Hynix recently reported better-than-expected earnings as well. In the second quarter of this year, it recorded sales of 8.607 trillion KRW and operating profit of 1.947 trillion KRW. Compared to the same period last year, sales increased by 33.4% and operating profit surged by 205%. These figures exceeded market expectations (operating profit of 1.8 trillion KRW).

Despite the strong performance, SK Hynix’s stock price has not gained upward momentum due to heavy selling by foreign investors. Foreign investors have maintained a net selling trend every month this year except for June. They sold 132 billion KRW and 201.6 billion KRW in January and February, respectively, followed by a net sale of 959.1 billion KRW in March. This was followed by net sales of 238 billion KRW in April, 409.7 billion KRW in May, 277.8 billion KRW in July, and 235.4 billion KRW this month. As of yesterday, foreign investors’ net sales of SK Hynix this year have reached 2.309 trillion KRW. Institutional investors also sold 424 billion KRW as of yesterday, while individual investors were the only group to have net bought 2.67 trillion KRW.

As the stock price declined, SK Hynix’s share of the market capitalization also shrank. The company’s market cap share, which was 4.64% at the beginning of the year, decreased to 3.48% as of yesterday. Its market cap ranking has also become precarious. Although the gap with Naver, which was ranked third at the end of last year, was over 30 trillion KRW, the gap with LG Chem, ranked third as of yesterday, is only about 5.6 trillion KRW.

Experts predict that SK Hynix will steadily rise after a temporary adjustment period. Ahn Kyu-jin, a researcher at DB Financial Investment, said, "Demand for server DRAM and solid-state drives (SSD), which was strong in the first half of the year, will temporarily slow down in the second half, but the trend toward non-face-to-face IT due to the habituation of untact lifestyles will continue. Although short-term concerns remain due to the ongoing COVID-19 issue, the medium- to long-term outlook for the memory market improvement remains valid."