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As predicted, the initial dip seen last October, attributed to the large sell-off of investment grade wines as global economies turned sour, is starting to show signs of sustained recovery, thanks in large part to the unique supply and demand characteristics that influence this market. Increasing worldwide demand for these wines, particularly from the Asian market, has resulted in an inverse supply curve and prices ticking back up.
It would appear that Hong Kong’s intentions are clear in wanting to become the trading hub for fine wines in the region by adopting a zero tax policy on wines and spirits to replace the 40% tax levied previously. This, combined with the weak sterling, has been the catalyst for the major auction houses, (Sotheby’s, Christie’s, Acker Merrill), setting up shop in Hong Kong and enjoying considerable success. Traditionally, these same auction houses hold their monthly sales of fine wine investment in London and New York to provide added value to their core of art buying clients, which stands in contrast with the fledgling market developing in Hong Kong where wine has taken centre stage.
Rather than being ‘wine investors’, the profile of buyers in the East Asian region suggests that they are buying for consumption rather than profit, however with such a strong track record of performance within the established market, we feel it is only a matter of time before speculation begins to play a greater role and further contribute to the longevity of this present growth cycle.
Although it is often said that the market for fine wines is the last to feel the impact of any economic upheaval and the first to show recovery, there is no substitute for seeing this principal put to the test as indeed we have over the last 10 months.
What has become apparent is that rather than there being a period of inactivity – consumption, collection and speculation have remained unhindered leaving auctioneers bullish and investors currently still able to buy investment grade wines at an advantageous price, indicating probable growth in the medium as well as long term.