SK Square Surges 44% in June, Outpacing SK Hynix and Hitting Record High

According to the Korea Exchange, SK Square rose 4.71% to close at 1.78 million won on June 19. The shares climbed as high as 1.891 million won during the session, setting a record since the company’s listing. The stock has jumped 44.36% so far this month and 414.45% since the start of the year, outpacing SK Hynix, which gained 18.47% and 324.58% over the same periods. Institutional investors were net buyers of 1.9025 trillion won of SK Square shares this month, helping fuel the rally.

SK Square’s market capitalization reached 234.8859 trillion won, and it has firmly held the No. 3 spot on the Kospi, excluding preferred shares, since rising to that rank at the end of April. Its market value was about 127 trillion won at the time.

Brokerages have repeatedly lifted their target prices for SK Square, but those increases have not kept pace with the stock’s surge. When the shares hit an intraday high of 1.891 million won on June 19, they moved above the highest target price on the Street, 1.87 million won.

SK Square is SK Hynix’s largest shareholder, holding about 20% of the chipmaker, and the two stocks have tended to move in tandem. As SK Hynix has rallied since last year on an artificial intelligence-driven memory shortage, the value of SK Square’s stake has climbed sharply.

A technical demand factor has also come into focus. Under South Korea’s Capital Markets Act, equity funds cannot allocate more than 10% of assets to a single stock. The Korea Financial Investment Association adjusts SK Hynix’s market-cap weighting once a month, but the sharp rise in the stock has created a gap between the association’s suggested weighting and the company’s actual market capitalization. That has made SK Square, which owns a 20% stake in SK Hynix, a practical alternative for institutional investors seeking more exposure.

“The SK Hynix market-cap weighting to be announced by the Korea Financial Investment Association early next month will probably remain below the company’s actual market-cap weighting,” Daishin Securities analyst Kim Hoe-jae said. That should preserve SK Square’s appeal as an alternative investment, he added.

SK Securities analyst Choi Kwan-soon said SK Hynix may extend its rally on expectations for a U.S. American depositary receipt issuance and expanded shareholder returns. He also said the gap between SK Hynix’s portfolio cap and its actual weighting could keep institutional buying of SK Square intact.

Expectations for SK Square’s own shareholder returns are also supporting sentiment. SK Securities, citing Fnguide consensus estimates, said SK Hynix’s free cash flow is projected at 14.6 trillion won this year and 24 trillion won next year. Because SK Hynix has announced a dividend policy tied to free cash flow, expectations for broader shareholder returns remain in place.

Choi said SK Square has announced 200 billion won in cash dividends and 40 billion won in share buybacks for this year. If SK Hynix increases its dividend, expectations for expanded shareholder returns at SK Square would also rise, he said.

Ko Jeong-sam, Hankyung.com reporter, jsk@hankyung.com