While restless investors may be looking with frustration at the state of global stock exchanges following China’s economic troubles, a golden opportunity is lurking in the fine wine market. Sisi Liang, risk consultant for BCG Platinion and self-confessed oenophile, has made it clear that now is the time to start collecting.
Investing in wine – a passion of patience
“Because the Chinese stock market crash has effectively brought down prices, the near future may be an excellent opportunity for interested investors to get into the fine wine market to reap rich rewards over the long run.”, Liang says.
She is talking about the “buy-and-hold” strategy of high yield investment. Regardless of Chinese market recovery, she predicts this tactic will yield its historic average of 50% over 10 years, and that returns could be even higher in the event of a strengthening Chinese economy.
How can she be so certain?
The Lafite Bubble and China’s influence on price of collectible wine
Global prices of investment grade wines have been heavily influenced by Chinese collectors in recent years. And it’s not the first time a drop in the Shanghai Composite, China’s stock market index, has coincided with a dramatic fall in fine wine prices.
During the ‘Lafite Bubble’ of 2010-2012, demand for Château Lafite Rothschild wine by Chinese investors reached a record high of almost $4000 per bottle, before plummeting to half the price in January 2012. As the graph shows, China’s stock market experienced parallel fluctuations at exactly the same time.
Bordeaux wines will bring highest yield investments
A few years on, Chinese buyers are diversifying to other brands of fine wine. Liang sees top-of-the-range Bordeaux and Burgundy wines as particularly high-yield collectibles, bringing the sort of return on investment described above. But only for those willing to wait.
“Fine wines are a natural long-term investment, because of the appreciation due to the maturing and increasing scarcity of the vintages. In the face of this embedded advantage, the trick is not to buy at a high. Because the Chinese stock market crash has brought down prices in the fine wine market, this market lull may be a good time to pursue that long-term investment strategy.”
How to invest in fine wine
Being a leading British wine brokerage, Capital Vintners has an extensive portfolio of fine and rare wines and a team of enthusiastic experts to assist you in developing your very own collection.
Give us a call or have a browse of our website for more information on how to start investing.