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Comment: China To Launch First Wine Investment Fund
- FT.com
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24th August 2011
By Thomas Gearing (Director) - Cult Wines Ltd -
http://www.cultwinesltd.com
The FT ran a story yesterday about the impending
launch of the first fine wine investment fund in
mainland China. The Dinghong fund is looking to
raise $156million with a closing date for
September/October.
Read the full FT.com article here
For an annual market cap of around $5billion, the
injection of this sum of money will no doubt have
reverberations through the market and I would expect
to see strong trading throughout Q4. In fact,
looking at previous market drivers such as the
Lafite Sotheby’s auction which was held in Hong King
last October and moved prices for the top vintages
of Lafite by some 15-40% almost overnight, this news
may well spark renewed buying and interest from
domestic markets who will be looking to take
advantage.
Whatever the case, the news is welcome at a time
when doubts had started to creep into some market
commentators’ minds with regards to the long-term
viability of the fine wine market as an investment
asset class. With a lock-in period of 5 years and
current fears of over subscription, the fund shows
the clear and obvious demand of the mainland Chinese
market and should provide wine collectors/investors
with confidence.
An interesting note from the details released is the
fund’s close relationship with Etablissements
Jean-Pierre Moueix. This would indicate that a
significant proportion of funds may well be focused
on right bank wines such as Hosanna, La Fleur-Petrus,
Trotanoy and of course Petrus. With recent reports
of a greater shift from mainland China to the right
bank wines, which to now have somewhat been
neglected by this emerging market, there could be
significant investment potential for collectors in
these wines.
In a market driven by sharp demand/supply imbalances
and more than ever on human reactions to market
events (especially those on the other side of the
world) it wouldn’t be unsurprising to see similar
performance in Q4 that occurred in 2010. Last year
the final quarter saw a huge turnaround in demand
and prices after a somewhat flat Summer (post 2009
en primeur). Seasonality and cycles are evident in
many markets – is this the emerging pattern for the
fine wine market? If so, then those who are most
savvy will make their play in the quieter summer
months.
For those who feared that Lafite had run its course
(as was mentioned in an Andy Xie’s article this time
last year) I would predict that the Asian favourite
may well be heavily involved in this investment
fund’s composition. What affect this will have on
prices I’m not sure, but with a few sharp prices
available at the moment a few people will
undoubtedly make a healthy profit.
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