Koreans can buy SK hynix shares at home. Why pay more for its ADR?

Korean investors are paying steep premiums for SK hynix's American depositary receipts (ADRs) in New York even though they can buy the chipmaker's shares more cheaply at home, analysts said Monday.

There is little economic rationale for Korean investors to buy the ADRs.

Since the securities began trading on Nasdaq about two weeks ago, they have commanded a premium of 16 to 51 percent over SK hynix shares listed in Seoul.

The tax treatment is also less favorable.

Capital gains on locally listed shares are largely tax-free for Korean retail investors, while profits from overseas stocks are subject to a 22 percent capital-gains tax after an annual deduction of 2.5 million won ($1,704).

For some individual investors, however, the attraction appears to lie less in valuation than in short-term trading patterns.

"When the underlying shares rise, the ADRs follow," one investor wrote in an online community.

"They tend to fall less and rebound more strongly than the Seoul-listed shares, and they can be traded at night, when the domestic market is closed." Korean investors bought a net $675.5 millio ...