July saw an update to the Liv-ex 100 index, the industry leading benchmark which represents 100 of the most sought-after wines from a number of regions for which there is a strong secondary market. To qualify, wines must have attracted critical acclaim from a leading critic (a 95-point score or above) and see regular activity on Liv-ex. The wines included in the index are reviewed annually by Liv-ex to ensure that they reflect market developments. Today, 26 of the 100 components encompass Burgundy, Champagne, Italy, Rhone, Spain, USA and Australia.
This year 22 wines have been removed to make way for newer vintages. They include a number of now physical 2012 and 2013 vintages. The complete changes to the indices are shown in the tables below:
This year, a number of older First Growths have been removed from the index and have been replaced by more active and younger rising stars from Bordeaux. These mainly consist of vintages from the 1990s that have been removed to make way for 2009s and 2010s. It is the first time Smith Haut Lafitte and Haut Bailly have been included in the index.
The Bordeaux 500 index and the Liv-ex Fine Wine 50 have also been updated this month, with the 2003 vintage being removed from both indices to make room for the now physical 2013 vintage. These indices are now composed of wines from 2004-2013. Components of the Bordeaux 500 index will be reviewed later this year.
The Liv-ex Fine Wine 50 Index has continued its strong upward momentum this month, taking it to its highest level since October 2013. It closed Friday at 306.59, up 6.8% month-on-month. The index has directly benefitted from weaker Sterling in the wake of the Brexit vote four weeks ago.
Yet historically, this is not the strongest monthly move on record for the Fine Wine 50 Index. As can be seen from the graph above there have previously been three strong and extended rallies when the index pushed higher. The first followed proposed UK pension reform (fine wine as a qualifying SIPP asset) and the boom in fine wine investment funds. During this period, the index achieved its record month-on-month move, up 13% in May 2007. Between July 2005 and July 2007, the Fine Wine 50 Index increased for twenty-five consecutive months and registered its second (11.6%) and third (8.7%) highest monthly moves.
There were also two other notable periods when the index experienced strong upward momentum. The second followed the Lehman Brothers collapse and global central bank action, including China’s RMB 4 trillion stimulus package. This saw the index register its fourth record month-on-month increase when it moved 7.7% higher in April 2010. This rally briefly paused in mid-2010 before commencing a third phase after the ‘greatest ever’ 2009 vintage was released.
The recent 6.8% rise is the ninth largest monthly move for the index. The question is: can this rally be sustained and extended? With summer now upon us we may need to wait for the Autumn to find out.
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The Liv-ex Fine Wine 50 Index continued its upward momentum this week, taking it to its highest level since October 2013. On Thursday, the index closed on 306.19, up 1.8% on the previous week. So far this month it has gained 4.8%.
While the total value of trade dipped, volumes increased as focus turned towards more accessibly priced wines.
Bordeaux’s trade share increased after spending the first two weeks of July under 70%. Nine of the top ten wines traded by value this week were from the region, though only two of these were First Growths. The five Premier Cru represented a low 15.5% of total activity. Of these, Margaux and Haut Brion were the most active, accounting for around one third of the First Growths’ share. The latter has been in focus recently after the 1989 vintage traded at a record high, while Margaux 2012 was the sixth most active wine by value and traded at a fresh high of £3,010 per 12×75. It was the best performing wine of the Fine Wine 50 Index in June, up 10.5% on the previous month.
Burgundy’s share also increased this week. Arlaud, Bourgogne Roncevie 2013 (WA 83-85) and Maison Alex Gambal, Bourgogne Blanc 2011 (WA 85) both found the bid. The ‘Others’ share was lower after activity for Penfolds, Grange 2009 and 2010 lifted the region last week.
Leoville Barton 2010 featured among the top five wines traded this week. It was described by Robert Parker as “one of the spectacular wines of the vintage” and was upgraded from a barrel range of 91-93+ to 96+ points when tasted from bottle in February 2013.
Last week, Haut Brion 1989 traded on the Exchange at £14,846 per 12×75, an all-time high. The wine – described by Robert Parker as one of the “greatest First Growths” he has ever tasted – is now above the level it traded at during the peak of the market in June 2011. It is one of six Haut Brion vintages awarded 100-points by Parker. In addition, the 2015 release has been awarded 98-100 points by Neal Martin.
The chart above compares the 1989 vintage with three younger ‘perfect’ Haut Brion vintages at various points since the market peak. As the chart shows, the 2005, 2009 and 2010 are all below their June 2011 levels but have increased over the past year.
The market has recently seen good activity for 100-point wines, with the current bout of Sterling weakness making higher-value wines more attractive to Euro and Dollar-based buyers. Haut Brion has traditionally offered First Growth value to buyers, making its 2005, 2009 and 2010 interesting prospects. They are perhaps even more compelling when one considers the level at which the 1989 is now trading.
A version of this article originally appeared in an email update for Liv-ex members earlier this week.
The Fine Wine 50 Index has continued to firm in recent weeks. It closed Tuesday at 304.05, its highest level since October 2013. Likewise, global equities have been on a bullish run. The S&P 500 Index and Dow Jones Industrial Average have hit new all-time highs, while the FTSE 100 Index struck an 11-month high this week.
This year, the fine wine market has benefitted from weaker Sterling. There has been strong Euro and Dollar-based buying that was boosted in the aftermath of Brexit. Exposure on the Exchange – the total value of firm bids and offers – has hit a new all-time high of £34.5 million, while the bid:offer ratio has climbed steadily post-Brexit to 1.47. The number of active markets – wines with a bid or offer against them – has also reached a new record of 6,500, while the number of spreads – wines with a bid and offer against them – stands at 1,300.
There is, however, a caveat to this bullish outlook. The average spread on the Fine Wine 50 Index currently stands at 5.4%. One month ago it was 4.4%. Widening spreads suggest sellers are now raising their prices faster than buyers are raising their bids. The market is also now entering the seasonally slower summer period.
While global equities continue to ride a bullish trend it should be noted that the Fine Wine 50 Index is still 32% below the June 2011 peak it reached at the height of the China-led bull market.
We have observed a tentative recovery underway this year after a long period of decline. The question is whether Brexit and the resulting currency effect is the spark that lights the fuse for a more sustained long-term recovery for fine wine prices.
One year ago, Robert Parker’s ten-year retrospective review of Bordeaux 2005 was released. Prior to the release of the report, some felt that the critic had initially underrated the vintage. Parker himself had conceded in an interview with Liv-ex in 2012 that although he was “originally worried about the tannin levels in 2005 […] the wines are so concentrated I think they will be just fine – they just need a lot of time.” This, combined with a handful of upgrades in late 2014, led many to anticipate further upgrades across the vintage. Prices began to rise and trading activity increased.
The results of Parker’s tastings revealed 12 ‘perfect’ 100-point wines – up from the two that were awarded three digits in his first in-bottle report. However, with the exception of Haut Brion and Mission Haut Brion, these high scores were concentrated in the Right Bank – a surprise to many.
One year on, trading activity for Bordeaux 2005 has returned to a level seen before interest piqued towards the end of 2014, as the chart above shows. But how have prices reacted?
Between June 2014 and June 2015, when Parker’s report was released, the 2005 vintage wines of the Bordeaux Index gained 10.3%. Since then, increases have been slower: the wines are up 4.9% over the past year on average. Performance has been divided: two thirds are in positive territory over one year; the remainder have declined.
A handful of wines have seen a significant boost. Some of these, including Smith Haut Lafitte and Haut Brion were beneficiaries of Parker’s review. Others owe their successes to current trends in the market. Four of the five second wines of First Growths – which have recently found demand – are represented. Pavillon Rouge 2005 has increased by 18% over the past year despite dropping three points in Parker’s review.
Among those that have declined is Margaux 2005. Parker had twice awarded it a barrel range touching 100 points, making it a candidate for the perfect score last year. The wine instead maintained its score of 98+. It crept up a modest 7.8% in the year ahead of the report but has dipped 5.1% since failing to see an upgrade.
Scores: www.erobertparker.com. Prices: Liv-ex. Collectors can search fine price performance information at www.cellar-watch.com.
Trade by value and volume were both lower this week but the Fine Wine 50 Index maintained its momentum and is now at its highest level since November 2013. It closed at 300.79, up 1.6% on the previous week.
Bordeaux’s trade share remained low. The First Growths represented 17.5% of total activity. Lafite Rothshild was the most active at 34% and Haut Brion was second at 29% of the First Growth’s share.
But buyers were focussed on Bordeaux quality. Petrus 2010 (WA 100), Haut Brion 2009 (WA 100), Petrus 2008 (WA 97) and Haut Brion 1989 (WA 100) were all in the top ten wines traded by value this week. Haut Brion 1989 traded at its highest level on the Exchange at £14,846 and the bid has since risen to £15,000.
It was a strong week for the ‘Others’ with the region representing 21.1% of activity by value. Australia’s share was particularly high at 17.6%. Penfolds, Grange 2009 (WA 97) was the top wine traded by value and Penfolds, Grange 2010 (WA 99) was also in the top ten. Opus One 2009 and Stag’s Leap Wine Cellars Cabernet Sauvignon Cask 23 2012 (WA 96) boosted the US’s share.
In terms of volume, Bordeaux garagistes were in favour this week with Fleur Morange second wine Fleur Morange Mathilde 2009 (WA 92) and 2010 (WA 93) top. Fleur Morange 2005 (WA 96) was also popular and was the sixth most active wine traded by volume this week.
The chart above shows the historical relationship between the average prices of the wines in the Liv-ex Fine Wine 50 Index (the ten most recent vintages of the Bordeaux First Growths) and the DRC Index (composed of DRC’s six wines) – dividing one by the other to create a ratio.
At the beginning of the year it was observed that DRC prices looked overstretched and that an adjustment in this relationship was overdue. This briefly proved to be correct.
The DRC:First Growth ratio peaked at 6.11:1 in November 2015 when the Fine Wine 50 Index bottomed out, suggesting the First Growths had reached a point where they offered relative value compared to the wines of DRC. As can be seen from the chart, however, the ratio has recently changed direction and now stands at 6.16:1 – above its peak level last year.
While merchants were preoccupied with Bordeaux 2015, Burgundy sailed on. The Burgundy 150 Index (which contains DRC’s six wines) rose 5.2%. It was the best performing sub-index of the Liv-ex 1000 in June. It is also the strongest performing Liv-ex index over one year, rising 8.2%.
Activity in June was boosted by several big movers from DRC on limited volume. DRC, Richebourg 2003 was up 35% month on month with the 2007 vintage up 24%. Likewise, DRC, Echezeaux 2010 increased 23%. The 2011 that was up 22%. DRC, Romanee Conti 2005 firmed 22% over the same period.
The ratio currently stands at 1.75 standard deviations from the mean of 4.5 for the ten-year period.
Haut Brion 1989 traded at an all-time high on the Exchange this week at £14,846 per 12×75. The wine has been rated 100 points by Robert Parker on several occasions and was identified as “wine of the vintage” and as one of the “greatest First Growths” Parker ever tasted.
As a brand, Haut Brion has seen its popularity increase significantly since the end of the China-led bull market when Lafite Rothschild dominated the First Growth market. Since the market low in July 2014, the Haut Brion Index – tracking the prices of the last ten physical vintages – is up 15.8%. It is currently the second best performing First Growth behind Mouton Rothschild.
Haut Brion has generally appealed to buyers seeking value. It has the second highest average Wine Advocate score (96 points) and the lowest average market price (£3,704) across the most recent physical vintages of the First Growths. Like the 1989 vintage, the 2005, 2009 and 2010 all scored 100 points, and the upgraded 98-point 2012 vintage was “one of the stars of the vintage”. The 2015 release was awarded 98-100 points by Neal Martin. Indeed, Liv-ex has previously identified Haut Brion as one of the next potential First Growths to take centre stage.
Haut Brion 1989 is undoubtedly an iconic expression of the Haut Brion brand. It is 27 years old and as a result supply is much diminished. As the chart below shows, the wine recently traded on the Exchange above the level it traded at during the peak of the market in 2011. It would seem that we are on the cusp of a breakout…