First-Growth trade subdued as buyers sit on their hands

After energetic price rises in January and February, the fine wine market paused for breath last week. Mounting global economic uncertainty, as well as expectations of an expensive Bordeaux 2010 campaign, may well have contributed to the slowdown in trade, which saw the Liv-ex Claret Chip Index move down 0.50 per cent to a close of 441.71. Amid softer demand, Haut Brion was the only First Growth to end the week in positive territory.

The chart below tracks the price growth of the Claret Chip's component brands since early 2004. Using this timeframe, Lafite has clearly outpaced the other Firsts, whilst Mouton has only recently won the battle for second place. And although Haut Brion has put in the strongest performance over the past six months, it is still some distance behind its peers in terms of price movement since 2004.  

Cc copy 

Fine wine, BRICs and billionaires in 2011

Yesterday saw the release of Forbes magazine’s latest billionaires list. According to the results, the number of billionaires in 2011 has reached a record 1,210 – up 20 per cent from last year’s 1,011. With 25 per cent of new entrants from China, and 15 per cent from Russia, the 2011 list underscores rapid economic development in the the so-called "BRICs" (Brazil, Russia, India and China).

As we have mentioned previously on the blog, there appears to be a striking correlation between the number of billionaires and fine wine prices. This can be seen from the chart below, which tracks Forbes data against the Liv-ex Fine Wine 100 Index. (We have converted the Liv-ex Fine Wine 100 Index to dollars to remove the effects of currency movements.)

Billionaires list

Why the connection? The number of billionaires and demand for blue-chip wines are, of course, strongly linked to global wealth creation. This argument is strengthened by the findings of a recent IMF report, which suggests a close relationship between growth in emerging market economies – such as China – and fine wine prices.

Christie’s HK auction achieves £6m

The Christie's Finest and Rarest Wines Auction in Hong Kong on the 4th and 5th of March uncorked another round of keen bidding from Asian buyers. The two-day sale, which took place in the Mandarin Oriental Hotel, attracted just over six million pounds and saw 677 lots go under the hammer. Top achievers included Tache 1961 (£ 56,876; 6x150cl), Romanee Conti 1929 (£ 47,397; 3x75cl) and the 1982 vintages of Petrus (£51,188; 12x75cl) and Lafite (£42,657; 12x75cl). Compared to Liv-ex trade prices (represented by the Liv-ex Mid Price), Hong Kong buyers paid an average of 12 per cent above market for the First Growths. As we highlighted in a recent blog post, however, removing the buyer's premium shows sellers' less impressive returns. Based on a buyer's premium of 20 per cent (though this can be higher) hammer prices were an average of seven per cent lower than the Liv-ex Mid Price.

The table below shows the First Growths that fetched the highest prices at auction. As you can see, many of the most expensive wines achieved less than the Liv-ex Mid Price. 

Auction Results 
Prices are in GBP and exclude buyer's premium. 

Liv-ex indices available on Thomson Reuters Datastream

Thomson Reuters Datastream - the world's largest financial statistical database – has added the Liv-ex indices to its coverage. Datastream enables instituational investors and academic researchers to analyse and explore macroeconomic trends and relationships. The service gives subscribers access to more than 100,000 leading benchmarks, including the MSCI, FTSE and S&P.  

The chart below shows the Liv-ex Fine Wine 100 Index (blue) and the Liv-ex Fine Wine Investables Index (green) as they appear on Datastream. 

Liv-ex indices on DatastreamDatastream subscribers can locate the Liv-ex indices by entering the following codes:

Liv-ex Claret Chip – LIVCHCH

Liv-ex Fine Wine 50 – LIVFW50

Liv-ex Fine Wine 100 – LIVF100

Liv-ex Fine Wine Investables – LIVFWIN

Using Datastream, this graphic shows how the Liv-ex Fine Wines Investables Index has outperformed the MSCI developed world stock index and the Goldman Sachs Commodities Index over the past five years.

Investables vs MSCI and GSCI

Liv-ex indices maintain momentum in February

First-Growth price rises gathered pace in February and saw all of the Liv-ex indices post sizeable monthly gains. The Liv-ex Fine Wine 50 Index led the way, rising 4.4 per cent month on month to 437.21. The index has risen 9.0 per cent year to date and 60.0 per cent year on year. 

The Liv-ex Claret Chip Index ended the month at 444.55 – up 3.9 per cent on January and 53.0 per cent year on year. 

The industry's leading benchmark – the Liv-ex Fine Wine 100 Index –  gained 3.3 per cent to 357.45. The index is up 6.3 per cent year to date and 41.1 per cent year on year.

Edging further ahead of Fine Wine 100, the Liv-ex Fine Wine Investables Index rose 3.8 per cent to 359.57 in the month to 28 February. The benchmark posted a yearly increase of  44.3 per cent. 

The Liv-ex Fine Wine 500 Index moved up 3.1 per cent month on month and 24.6 per cent year on year to 269.23.     

Liv-ex Fine Wine 100