Investors eye wine for capital growth

October 27, 2009
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, HONG KONG, Oct 27 – Hong Kong investors are turning to rare vintages as an alternative bet for good capital growth, a trend driven by an insatiable demand for imported wine in China.

Having witnessed tumultuous times for the stock and property markets in the financial crisis, investors now see fine wine as a relatively low-risk, cheap investment which guarantees long-term returns.

"We can easily buy HSBC shares because they will always be available on the market," George Tong, a wine connoisseur-cum-investor and toy company owner, told AFP.

"Fine wine, on the other hand, is something that cannot be replenished. Its value is bound to rise."

"Every time someone opens a bottle of 1982 Chateau Lafite-Rothschild, the rest of the world is deprived of one more," he said, referring to one of the most sought-after vintages.

The strongest impetus for investors came from a surging demand for imported wine in China, which has seen breakneck growth in personal wealth boosted by the government\’s four trillion yuan (585 billion dollars) economic stimulus package last year.

In China, top-echelon vintages can be a status symbol for the super-rich as well as a powerful tool for building business relationships.

"You have to appreciate it from a cultural point of view. Chinese people show you how much they value you from the type of wine they serve you," said Carson Chan, managing director of auction house Bonhams Asia.

"In order to return the respect, you must serve them wine of the same calibre."

Chan said the wealthy and the rising middle class in China are becoming increasingly knowledgeable about Western wine, and their hunt for quality brands would eventually widen from the current focus on the well-known Bordeaux region in France.

He said that fine wine would become an increasingly common investment for people in Hong Kong and elsewhere in the region.

Xavier de Eizaguirre, president of Vinexpo, the world\’s biggest wine and spirits exhibition, has predicted that China, one of the ten biggest wine consumers in 2008, would be ranked number seven by 2012.

Wine prices have been significantly boosted by the Chinese market.

The price for a bottle of 2005 Domain de la Romanee Conti, for example, jumped from about 2,000 US dollars in 2005 to 8,200 dollars early this year, according to market data.

Hong Kong\’s wine market has become a major beneficiary of that trend, thanks in part to a government move to scrap a 40 percent tax on the tipple last year and its geographic proximity to mainland China.

Auction house giants Sotheby\’s and Christie\’s both said this month that the southern Chinese city has overtaken New York and London as the world\’s largest market for rare vintages.

Sotheby\’s raised 14.3 million dollars from just two auctions in Hong Kong this year, almost double the figure of London, which has had a total of eight wine sales so far in 2009.

At Sotheby\’s latest wine sale in October, mainland Chinese buyers accounted for as much as 35 percent of the total number of buyers, compared to 10 percent in its April sale here — the first one held by the auction house in the region.

A Sotheby\’s spokeswoman said the October sale fetched 30 percent more than its estimate, with an anonymous Chinese bidder splashing out a record 93,077 dollars for a bottle of 1982 Chateau Petrus Imperial.

Rival Christie\’s said its Hong Kong wine auctions had the highest average lot values among its global sales, at 150,000 dollars per lot.

For some, there is another dimension to the investment potential of wine.

Investment planner Samuel Young, who bought more than 10 boxes of rare vintages from the Sotheby\’s October auction, said he would sell the wine to his key clients.

"My business clients, including those from the mainland, would sometimes ask if they can buy a few bottles off me," he said.

"I will sell the wine to those I want to build a good relationship with and I won\’t try to make any money out of it," he said.

"It\’s like doing a favour to them. To me, it\’s another kind of investment."

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