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To: long-gone who wrote (14826)	7/23/1998 5:56:00 PM
From: goldsnow	Read Replies (1) \| Respond to of 116814

SEOUL, July 23 (Reuters) - South Korea's lucrative bullion 06:56 a.m. Jul 23, 1998 Eastern By Jae Hur SEOUL, July 23 (Reuters) - South Korea's lucrative bullion transhipment trade is flourishing as the won's sharp recovery against the dollar polished its lustre, along with relatively high domestic interest rates, traders said on Thursday. But they said the won's recovery has cast a dark cloud over local bullion wholesellers' continued efforts to collect gold from citizens for exports, because the appreciating currency is squeezing their margins. ''The won's recent gains against the dollar has made some trading arms of the country's big chaebols (conglomerates) earn huge profits,'' Kay Lee, Seoul-based manager of the World Gold Council, told Reuters. Lee said they were reaping profits from foreign exchange rates and from arbitraging between higher local interest rates and the London Interbank Offered Rates plus risk premiums of the country. The won closed at 1,273.5 per dollar on Thursday, after hitting an intra-year high of 1,265 a week ago. The won's recovery since hitting a record low of 1,995 in late December has been underpinned by accumulating current account surpluses and increasing foreign exchange reserves. The transhipment trade was also working as a cash source for local companies facing restructuring to secure money from overseas with lower international interest rates amid the country's financial crisis, Lee said. In July 1996, South Korea cracked down on the once booming gold transhipment trade by shortening the deferred payment period to a maximum 30 days from 120 days. Previously, bullion houses had imported huge amounts of gold on 90-day deferred payments to be immediately exported with proceeds placed in high interest-bearing domestic money market instruments. The bullion transhipment trade had been depressed earlier this year due to the wobbly won against the dollar and the nationwide campaign to collect gold from patriotic citizens under the economic crisis, traders said. One trade source said the daily gold trade volume by one local trading firm stood at three tonnes for several weeks before recently scaling down the gold trade on fears of the dollar's recovery against the won. Meanwhile, trade sources said local tax authorities might be looking at some local bullion wholesellers, who were trying to dodge the 10 percent value-added-tax (VAT) due on their bullion trades. The sources said they have to complete their VAT reports for the first half of this year by Saturday. The local bullion wholesellers were believed to have reaped huge profits by buying gold jewellery from citizens without paying VAT and selling it to the local trading houses for exports charged with VAT. The local industries are set to report to local tax offices twice a year -- July 25 for the first half of the year and January 25 for the second half. South Korea's gold exports rose to 413.4 tonnes in the first half of this year from 285.5 tonnes a year ago, data by the Korea International Trade Association showed on Tuesday. The country's gold imports fell to 190.5 tonnes in the first half of this year from 303.9 tonnes a year ago. South Korea's gold exports were 575.9 tonnes in all of 1997, while its imports totalled 606.1 tonnes. Since early January, local financial institutions had collected more than 225 tonnes of gold from ordinary citizens to help bolster the country's foreign exchange reserves. Patriotic South Koreans took the campaign to heart and queued to sell rings, necklaces, bracelets, hairpicks, keys, coins, trophies, turtles and bars. ((Seoul Newsroom +82-2 727 5651, fax +82 2 727 5666 seoul.newsroom+reuters.com)) + Reuters terminal users can see Asian/Australian physical precious metal prices by double clicking on: (GOLD/ASIA1) and (GOLD/ASIA2) REUTERS jh ny Copyright 1998 Reuters Limited