Commentary: SK Hynix is a golden goose. It has to lay more eggs

RETAIL INVESTORS SHOULD TREAD CAREFULLY

While institutional investors may be buying SK Hynix’s shares at their own risk, billionaire Chey does have millions of small investors to answer to, especially in a society that prizes egalitarian values.

Throughout this year, mom-and-pop traders have bought the stock, filling the void left by global asset managers selling into the rally. Wanting to amplify their returns, many purchased leveraged exchange-traded funds that were launched in late May.

These retail investors have already been penalised as SK Hynix’s Seoul-listed shares have whipsawed in recent weeks, creating losses due to a phenomenon known as volatility decay. 

If SK Hynix can’t continue to deliver outsized profits and retail investors’ bets backfire, we might see real wealth destruction among South Korea’s middle class. In recent days, more positions have been forced into liquidation, a sign that perhaps the less savvy are caught in a high-stakes game that they don’t fully understand.

US investors, of course, are even later to the party. They should tread carefully. 

SK Hynix’s blockbuster US listing signals South Korea’s arrival on the global economic stage, but it also brings with it potential societal pitfalls.

Its success is so spectacular that chipmakers have become the only game in town in an economy that otherwise lacks a structural turnaround story. The government relies on it for national rejuvenation, while households hope to capitalise on the stock rally and build a golden nest egg.

The chipmaker therefore must balance these competing interests, while its corporate spending decisions will affect the outcome of the global AI investment boom. 

Billionaire Chey’s golden goose will have to lay many eggs.