While the US and Europe remain battered by the financial tsunami that has hit them, the Asian economies are gradually moving into recovery phase.
Financial markets, which are generally reliable indicators of economic health, are showing encouraging signs of recovery in Asia. The Dow Jones Industrial Average may have risen 11.3 per cent in the second quarter of 2009, but Japan’s Nikkei 225 did better with a 23 percent increase. Of the other major equity markets, China’s rose 25 per cent and India’s shot up 53 per cent! What this means is that buyers in Asia, especially the growing number of rich people, have more money to spend. And they are spending some of it on fine wines, whose market is experiencing an unexpected revival.
As reported in The Times, at a Christie’s auction in New York, the highest bids went to Asian buyers. Similarly, at the Sotheby’s auction in New York, an Asian buyer paid more than $48,000 for a case of 1990 Le Pin, which was more than double the pre-auction estimate. In fact, each of Sotheby’s nine wine sales during the first half of 2009 exceeded the estimates, clocking up an impressive $19.2 million against the anticipated $14.8 million. Similarly, in Hong Kong, Sotheby’s did business worth $6.4 million, more than double what was pre-auction expectations.
In increasing numbers, Asian buyers are bidding at international auctions. In terms of numbers, they make up a mere 15 percent of the UK market, but in terms of value, they make up over 32 percent of the market.
Liv-ex, the London-based fine wines exchange, saw its index of fine wines from the top Bordeaux chateaux increase by 5 per cent during the first five months of 2009 in contrast to the fall of over 13 per cent in the index during 2008.
Justin Gibbs, a Liv-ex director, stated, “As far as we can tell, Asian buying has been sustained throughout the first half, and especially strong in the second quarter. Confidence levels in Asia seem pretty firm.”
Because of the recession, UK wine sellers were reluctant to take risks. While the distress sales in the wake of the global financial crises have tapered off, market rebuilding is still slow.
On the other hand, Japan, the richest Asian nation, has developed a taste for fine wines. During the 1980s and 1990s, while the Japanese conglomerates were taking over marquee American and European entities, their top executives were acquiring impressive wine collections. It is a matter of pride for many Japanese that, each year, the first year’s crop of Beaujolais Nouveau goes to Japan. And there is a huge market for other wines too. In fact, to reach out to a larger downmarket, some wines are available in plastic bottles!
The economic boom in China, while it has cooled off a bit, still has created a significant demand for fine wines among the newly rich entrepreneurs. Hong Kong’s zero wine tax, scrapping of duty and the weak sterling has had the effect of releasing huge pent-up demand.
Tags: Asian market, Bordeaux, Fine wine investment, Liv-ex