Fine Wine Investment Update March 2013
The Liv-ex Fine Wine 100 Index showed continued growth in February, It closed the month UP at 3.1%.
The Liv-ex Fine Wine 50 Index increased 2.9%, and its now up 9.7% since mid-November. These are fairly decent improvements for the whole market that i’m referring to.
In the Liv-ex 100 Index, only a fifth of the wines dropped in price in February. Prices had shown considerable strength late last year – Latour 2002 has since pulled back, but on the whole the First Growths have had a very good month. Take note however that there are still many first growth vintages that are very much down from 2008 prices.
Chateau Mouton Rothschild 2006 hit its five-year price low in January and has been one of the wines also yet to start bouncing back.
Chateau Montrose 2009 is climbing back to the peak it touched this time last year, when Parker released his in-bottle scores for the 2009 vintages. Montrose, we recommended end of last year at 2200 Pounds a case. Liv ex market price is now 2350 pounds/case, our current bid price is 2335. So that’s already showing us a profit in just a few months.
Sothebys latest auction at the last day of January sold over 2 million dollars and had their best hit rate in two years. Many of the wines were sold above prices being offered by what we consider expensive merchants pricing in the market.
The key to the success of this wine market over the next few years is the pace at which Chinas market is increasing, they are expecting China to overtake the UK by 2016 and become the worlds second biggest wine consuming nation which will be around 250 million cases a year, the United States is currently on 350 million cases a year.
There was an article by Forbes recently that said Last year the billionaires in China increased by 28% and overall worldwide the number of billionaires increased by 16%..
When you look at the five first growth wines from Lafite to Haut Brion they only produce on average 50,000 cases per year, its easy to understand that the prices are inevitably going to increase in value 5 years from now. Even despite the first growth market dropping in such a way. The old laws of supply and demand will out in the end.
China have no shortage of people already consuming wine and they have no shortage of people who want to drink wine the proof is in the figures and statistics surrounding wine imports into China and the rate of growth in wine consumption in China over the last 5 years.
The market has had a volatile 18 months and prices have dropped way below the trend levels, prices have started increasing in certain areas of the market but not come back to their original levels from 2008 or 2011 they are still way below what they were before 2008. There are some great bargains out there but one has to be cautious and careful where to invest.
It’s a good time to sell any wines in good profits that you have been holding for at least three years because profit taking as you go along is key to turning a good portfolio and locking in growth. This is a prudent choice to make as it hedges you against any market dips in the future.