The correlation between Chinese equity markets and fine wine prices was the main thrust of Bloomberg’s chart of the day, above.
Normalised from 18th April 2011, when the Chinese stock measure peaked, the chart compares the Liv-ex Fine Wine 100 against daily moves of gold, the Shanghai Composite Index and the S&P 500. While gold and the S&P have risen, both the Liv-ex 100 and the Shangahi stocks have dipped, mapping out a similar trajectory over the past 15 months. Financial blog site Zero hedge looked at the same data, also running it over a longer time period.
While the chart clearly shows correlation between Chinese equities and the Liv-ex Fine Wine 100 Index (and the significant outperformance of gold), it could well be argued that the real correlation is between China and Lafite Rothschild – the brand that has led the market down. Because the Liv-ex 100 is production and scarcity weighted, and the First Growths are produced in sizeable quantities, Lafite tends to have a large impact on monthly price movements.
But with almost all vintages of Lafite already down by more than 30% year-on-year – with some, such as 2008, having halved in price – have much of the potential losses now washed through? (This is a subject we will be tackling in a forthcoming market report). As we posted recently, when the market has previously been in a similar situation (based on 5 year CAGR) it proved a precipitious time to buy.
Meanwhile, with a rise of 0.84 points yesterday, the Liv-ex Fine Wine 50 has now posted three days of consecutive gains for the first time since March. Are traders starting to dip their toes back into the First Growth market?