Asian thirst for wine feeds new investment market

Asia’s thirst for rare and fine wine is moving beyond the dining table as the industry seeks to tickle the region’s capital markets as well as its taste buds. China is already the fastest-growing wine consumption market globally, and industry experts say wealthy Chinese business people are now also developing an appetite for the investment opportunity that wine offers. “Wine is a very passionate subject, much more so than stocks and shares. It’s a passion as well as an investment for our clients,” said Stephen Wickens, the managing director of Wickens & Co, a Hong Kong-based wine investment firm. “It’s a very safe investment and it’s very attractive at this time when people are uncertain about the stock and property markets.”

Two thirds of the 18-month-old company’s clients, totalling about 500, come from China and Hong Kong. Wickens reckons his client base will double next year. “Right now Asia is really driving the demand. The traditional markets of Europe and America are very slow,” he said on the sidelines of a wine trade fair in Hong Kong this month, which drew a record 934 exhibitors. Hong Kong has capitalised on the rapid expansion of personal wealth in China to become the dynamic centre of Asia’s wine trade since it abolished duties on wine imports in 2008. Wine imports are poised to set a new record after surging nearly 60 per cent year-on-year in the first nine months of 2011 to US$940 million. The figure stood at $895 million in 2010, up 73 per cent from $517 million in 2009. The wine industry council in the French region of Bordeaux says local producers saw a 92 per cent surge in export volumes to China in the 12 months to July, and a 69 per cent increase to Hong Kong. To capitalise on this, businesswoman Ling Zhijun has just launched Dinghong, mainland China’s first investment fund specialising only in wine — available only to those with one million yuan (US$160,000) or more at their disposal. She is waiting for the green light from authorities to start raising money, but says she already has investment pledges from a dozen people and will be able to collect 200 million yuan by the end of the year. “We’re banking on a return on investment of 15 per cent a year,” she said, adding she chose to focus only on French wines because those from the New World are “more standardised, a bit like Starbucks coffee”.

Hong Kong’s Wing Lung Bank, meanwhile, launched a wine financing service, the first in the southern Chinese city, in April this year to allow investors to borrow to buy wine at designated merchants. Buyers can borrow up to HK$5 million (US$650,000) with a repayment period between one and five years, and the response has been “overwhelming”, said assistant general manager William Tang. “Like many other businesses, the wine industry takes advantage of Hong Kong as the gateway to mainland China, where increased prosperity and changes in lifestyle have led to a significant rise in the demand for wine,” he said.

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