Mon, Nov 17, 2008 page12

• Economic crisis chilling Asia’s fine wine thirst

  UNDER THE HAMMER ‘Decanter’ magazine has reported a dramatic fall-off at US auctions, with 67 percent of lots selling at a recent auction in New York

  • AFP
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  In hindsight, Oct. 25 might not have been the best day for US wine seller Zachys to hold its inaugural Hong Kong auction.

  The day before some of the world’s most expensive wines went under the hammer, Hong Kong’s stock exchange closed at its lowest level in more than four years after a week of disastrous losses on worldwide markets.

  By the next morning, Hong Kong’s wealthy had apparently rallied and looked like they would start spending again.

  It was standing room only at the city’s upscale Mandarin Oriental hotel, where buyers spent more than HK$40 million (US$5.16 million) on fine wine, with three magnums of 1999 Domaine de la Romanee Conti selling for HK$161,000 apiece.

  Nevertheless, the amount raised by the auction was at the lower end of the pre-sale estimates, and 15 percent of lots failed to sell at all.

  Zachys president, Jeff Zacharia, conceded ahead of the sale that “expectations are lower than they would have been” before the financial crisis, with prices already down by between 10 percent to 15 percent in his home market.

  But he added: “There’s this continued increase in interest in fine wine, particularly in Asia. It’ll affect the wine market, but people will still drink wine.”

  The Hong Kong government sparked a rush east by wine industry players keen to cash in on a growing appetite for fine vintages in Asia when it scrapped a 40 percent tax on wine imports earlier this year in the hope of turning the city into a regional trading hub.

  New York seller Acker Merrill & Condit was among the first into the market in May, holding the biggest wine auction in Asian history.

  A total of HK$64 million worth of wine went under the hammer — including a case of Domaine de la Romanee-Conti 1990 which sold for 1.89 million Hong Kong dollars, setting a new auction record for that wine.

  Less than six months on, the situation looks very different and after years of unprecedented growth, the economic downturn has begun to affect prices.

  Nonetheless, experts remain confident that the market for fine wine in Asia will hold up, and some believe the financial turmoil may even give it a boost.

  “What happens in the financial world can actually fuel the wine collecting market. If putting it [cash] in a bank account is not safe any more, why not buy a couple of cases of wine,” said Carson Chan, managing director of auction house Bonhams Asia.

  “People who need cash are looking to sell, often at a reduced price. At times like that, the more serious and capable collectors are searching for additions to their collection. If you have cash, financial crashes are always a good time to buy,” he said.

  Gregory Deeb, co-founder of the Hong Kong fine wine storage company Crown Wine Cellars, believes prices will continue to soften in the coming months and even years, but will remain less volatile than stocks.

  “Wine first and foremost is much more liquid an asset — if you need to sell it, you can,” he said.

  “Wines are a superb, easily movable, hard to trace commodity that hold their price better than any other. This is making it very attractive to businessmen throughout Asia,” Deeb said.

  His confidence is clearly shared by Christie’s, which will this month hold its first Hong Kong wine auction for seven years, with Chateau Latour selling some historic vintages directly from its cellars in what the auction house says is an Asian first.

  David Elswood, the international head of Christie’s wine department, says that despite the economic conditions, the company’s expectations for the sale are high.

  “The big advantage for fine wine, as for other art, is that it is a tangible commodity-based asset and a far safer haven for investors than paper stocks and shares,” he says.

  “I would recommend buying gold, fine art and of course, the finest and rarest wines, if the stock market looks a bit risky.”

  Wine magazine Decanter has reported a dramatic fall-off in interest at US auctions, with 67 percent of lots selling at a recent Christie’s wine auction in New York.

  Nonetheless, the wine sellers appear optimistic.

  “It’s too early to say, but the wine market seems to have held up better than others,” Zacharia said.

  “That’s the beauty of wine — you can’t drink your stock portfolio,” he said.
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