The 2010 trading year saw returns as high as 418.5% on cases of Lafite Rothschild 2008. Since these figures are extraordinary and largely unprecedented, some experts project further returns of at least 25% + this year, whilst some see the beginnings of a ‘bubble’. China’s maintained demand for Bordeaux and United States re-entering of the market should see demand raised once more – and auction prices are also expected to continue to increase.

Experts wisely advise that wine investors shy away from the “quick buck” and enter fine wine investment with the expectation of following at the very least a 5 year plan. A strong market base should always lend itself to higher capital appreciation over a long-term investment.

Lower capital investment wines may include Lynch Bages (as its Far East importance is increasing); it sold high volumes in 2010 and may perhaps be expected to behave similarly in coming years. Beychevelle has also been chosen as a good portfolio addition to buffer against any instability as this wine has consistently seen fairly healthy appreciation.

Lafite Rothschild continues to appreciate far ahead of other wines in the First Growth category and remained one of the most traded wines of 2010 (across all vintages) and interest is expected to be just as high for the 2010 vintage. A word for Chateau Haut Brion; traditionally one of the slower-moving First Growths, in 2010 this asset has shown solid returns of 20%+ within better vintages.

Ms. Lee received the master of wine accreditation, a self-study program that takes at least three years to complete, in 2008, becoming the first Asian to hold the title and only one of 280 masters of wine in the world. A frequent contributor to industry publications such as Wine Spectator, World of Fine Wine and Decanter, Ms. Lee, 41, published a book on Asian food and wine pairings in November 2009, titled “Asian Palate.”

Ms. Lee is well-positioned. Asia’s recent appetite for fine wine brought record auction sales in October: Three bottles of 1869 vintage Chateau Lafite-Rothschild sold for 1.8 million Hong Kong dollars each (US$232,692) – the highest amount sold for wine at auction world-wide. “Hong Kong is really establishing itself as the premier wine center in Asia,” Ms. Lee says. She says she has a broad perspective of the Asian food-and-wine market, with Hong Kong being her viewpoint. Here are five trends she is watching out for.

The Next Lafite: “Right now there’s a huge Lafite phenomenon in China. I think there will be another iconic wine brand from France that the Chinese will embrace. Some up-and-coming wine producers to look out for are Chateau Haut Brion, Domaine de la Romanee-Conti and Chateau Mouton Rothschild.Winemakers, for their part, are looking to Asia as a security buffer for future economic downturns. The 2008 financial crisis didn’t really affect Asia, so the price of wine was somewhat cushioned. China in particular holds enough promise that wine will always enjoy high pricing.”

Women in Wine: “Women will play a greater role in both the wine trade and on the consumer side. More women are buying wine, and within the trade, there are more female sommeliers, wine CEOs and executives emerging in Asia. Look at markets such as Japan, where women are one of the most significant buyers in the Japanese market. As the wine market matures in Hong Kong and China, this will happen there, too.”

Wine Pairings with Asian Food: “A couple of years ago, hardly anyone was making an effort to introduce wine with local Asian food. Suddenly, everybody’s doing it. I think this hails a whole decade of experimentation. You’ll see a lot of Chinese restaurants with more serious wine lists. You’ll see wine groups appear. More Asian restaurants and hotels are taking wine more seriously.”

Asian Wine Critics: “Wine experts from Asia will be playing a greater role. You’ll see strong voices from key cities in Asia who will represent the palates of their areas. Wine producers will start to take note of what is the Asian palate, which is not a concrete definition but more an amalgamation of various opinions. So there will be an opinion leader that specializes in Bordeaux, Napa, Burgundy, you name it.”

Fusion Ingredients: “With travel, chefs have greater exposure to all sorts of ingredients. There is already usage of common Western ingredients in Asian cooking. For example, in Hong Kong, foie gras and truffles have infiltrated everything from dim sum to braised beef. I don’t think it works in all those contexts but it is a period of experimentation. In the West, many three-star Michelin restaurants use Japanese ingredients such as yuzu and uni. In the next couple of years, I think you’ll see more Chinese ingredients such as sea cucumber and abalone in Western cooking. This crossover of ingredients will happen at a more accelerated speed, too.”

The Wall Street Journal – Author: Cathy Yan

Source: http://blogs.wsj.com/hong-kong/2010/11/30/the-future-in-wine/

The wines on offer all came from the leading vineyards and vintages of Bordeaux and was carried out by the Beijing Poly International Auction Co – who used the services of well known French fine wine authority Claude Maratier for the selection of wines.

There were 131 lots in total, highlights among which were two single bottle of Chateau Lafite Rothschild from the fabled 1982 vintage, which achieved a sale price of nearly £6,750, quadrupling their estimate.

Also available were a presentation case consisting of two bottles each of Chateau Pétrus, Chateau Latour, Chateau Margaux and Chateau Haut-Brion, all from the classic 2000 vintage. Incredibly this had been estimated to fetch approximately £1,650 but actually sold for £18,500 approx.

Xinhua, the Chinese state-sponsored news agency, reported that M. Maratier was ‘very satisfied’ with the outcome and would be happy to work with Poly on further fine wine auctions.

According to Ma Zhefei, who oversaw the auction on behalf of Poly, almost all the buyers at auction have stated they wish to drink the purchased wines and were not buying for investment.

The view here at Provenance is that this would appear to be true by the very nature of the fact that most of the wines on offer seemed to be presentation cases or odd bottles of choice wines; certainly not a large presence “standard lot sizes” i.e. 12 bottle, unbvroken original wooden cases.

If Chinese interest is mainly driven by drinkers, this may have a significant impact on the demand put upon the world’s leading investment-calibre wines, but it is too early just yet to tell exactly the scale of such impact on fine wine pricing.

The abolition of high import taxes in Hong Kong has led the increasing number of domestic Chinese fine wine enthusiasts to leave the mainland to extend their collections.

Poly intend to organise further auctions in their Spring/Summer auction seasons because quite simply, once more according to Ma Zhefei, “The demand is there.”

James Reed, a director in Sotheby’s fine wine department is quoted as saying: “We have had two sales this year in February and March and both were roaring successes. It is not just a case of 98-99per cent selling; often the hammer price was towards the top or even above top estimate. Both times the sale room was very busy with active bidders, often new bidders.”

The article goes on to explain his view that ‘…wine is still seen as an attractive alternative investment that is less volatile than other markets; sterling is weak although optimists believe it will gain against the euro soon; people want to buy at the bottom of the market’ and, according to James Reed: “there is a shortage of stock, so people jump on what there is”.’

‘But although the credit crunch was slow to hit the wine market, it did hit, and between October and December there was a sharp fall in fine wine prices. Which might explain why buyers are returning to the market quicker than sellers. Justin Gibbs, a co-founder of Liv-ex.com, the fine wine exchange, says that the market fell 22.4per cent between June and December last year. However it has now risen 1.2 per cent with prices for top vintages, from 2000 and 2005, up 5 to 10 per cent this year.

The fine wine investment market tends to focus on the top vintages (2005, 2000, 1996, 1990 and 1982) of the five first growths (premier crus) from Bordeaux: Château Latour, Château Lafite Rothschild, Château Margaux, Château Haut-Brion and Château Mouton Rothschild and a few Burgundies, particularly Domaine de la Romanee Conti.

Over the medium to long term, the price of these wines tends to rise as supplies are depleted and demand increases – as more people from places such as Russia, China and India develop a taste for wine. For instance, a case of 1990 Château Lynch-Bages from Bordeaux cost £120 when it was released but is valued at £1,400 today.

Simon Staples, the sales and marketing director at Berry Bros & Rudd, the wine merchant, says that investors can still make money from wine but warns that newcomers need at least £10,000 “to register on the wine merchants’ radars”. As an added incentive as long as the wine stays in the warehouse it is exempt from duty and VAT; it is also exempt from capital gains tax.

But if you are tempted to start investing in these liquid assets you will find you are not alone. Mr Staples says: “Usually I would expect 20 new buyers a month to sign up to direct debt plans [cellar plans] to invest in wine but in February this figure rose to 101 and in March there were 52 new investors. The credit crunch means people don’t know what else to do with their money. They are interested in alternatives and looking to diversify.”’