One area of the world popular in many a fi-nancial discussion is China, and one area ofinvestment popular within China is wine.

China made it very clear it intended to bea dominant presence within the world’s finewine market, and flourishing way beyondany industry leading expert’s expectations -over the last few years, has done exactly that.China is now the fifth-largest consumer ofwine in the world and more importantly, ithas surpassed the UK and Germany as thelargest importers of Bordeaux wine.

Bordeaux has reported a strong surge inoverseas sales – with China and Hong Kongconfirming absolute dominance of the re-gion's export market. China and Hong Kongnow account accumulatively for well over€557m - over 60% of the region’s total ex-port market. Continuing to confirm merit tothe Eastern promise, Hong Kong also over-took New York as the wine auction capitalof the world last year, as total sales reachedHK$1.2bn (US$155m).

Hon John Tsang Chun-Wah - Hong Kong’sfinancial secretary, said that strong ties withthe established wine territories have helpedHong Kong to prove that fine wine “can beboth good for the stomach and for the bankaccount”.

Demand for fine wine is unsurprisingly onan upswing in Asia. The newer develop-ments in the market are that they are nowbuying for multiple reasons and not solelyfor consumption. “Fine wine has become anaspirational must have asset to many well-heeled entrepreneur. Soaring Shanghai

stocks, coupled with government stimulusand an explosive property market has con-verged to make the Chinese tycoon theworld’s most potent high net worth individ-ual”, says Daniel Paterson, Senior MarketAnalyst at BWC Management & Consult-ing.

It was back in October 2009 when the Chi-nese began their rise to the top of the finewine ladder. In a six-day display of financialmuscle flexing in Hong Kong, an impressiveseries of auctions were held by Sotheby’s, inwhich a single litre bottle of Chateau Petruswas sold for £58,000, far exceeding its esti-mates. With similar record-breaking successever since, the Chinese are now not onlybuying for consumption and customary gift-

ing, but also for investment. “Europe and the U.S have utilised the in-

vestment opportunities within wine foryears, of course the Chinese realise the mar-ket’s investment potential. Many are look-ing at the volatility of stocks and shares andwhispering; why not invest in somethingthat not only holds value but also more oftenthan not, appreciates consistently each year.There are many mouths to feed, and all ofthem appreciate the rarity involved”, ex-plains Freddie Achom, investment entrepre-neur and chairman of Rosemont GroupCapital Partners.

With the British, French and U.S govern-ments, openly benefitting from investinginto wine, it wasn’t long after China’s taxabolishment on alcohol in 2008, that theirGovernment approved several wine invest-ment funds of their own (including the Ding-hong fund which is at the end of its secondyear having invested more than £37millionand planning for at least another £55millionover the next three years). Meanwhile theamount of wine drunk at British governmentfunctions went up 20% last year with morethan £45,000 spent in additional stock forthe cellar – with the government stressing itis funded by auctioning off the most expen-sive bottles to buy more. The annual state-ment on the use of the wine cellar shows£63,000 was raised auctioning off just 54bottles of wine. With major lots of Bordeauxsold at auction, consisting of trophy labelssuch as Chateau Lafite, Mouton, Latour andPetrus. The U.K. government’s wine cellar,

Bordeaux still leading the way for the world’s wealthiest investors, particularly in ChinaBy Samuel Cheung of BWC Management & Consulting

Chinese Investors develop a taste for Alternative Investments

Samuel Cheung enjoying a glass at London’soldest wine bar - Gordon’s Wine Bar

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has an estimated market value of over£2.8million.

Also in the last 6 months, with the FrenchGovernment a little strapped for cash, theFrench presidential cellar at the ElyséePalace sold more than €500,000 (£418,658)at auction, with the bulk of the top lots pur-chased by Asian investors and importers.The majority of the funds raised were allo-cated to the public purse, but when theFrench Government revealed their budgetfor 2014, at least €50,000 would be dedi-cated to the purchasing of “new vintages”.According to the French daily newspaper LeParisien, tenders had been released to “fouror five large Bordeaux houses”, no surprisesto which.

As levels of economic uncertainty have in-creased, the traditional savings accounts andgeneral investment facilities within thosecountries affected have been unable to offeranything of substantial interest to most.Alongside this, it has also been unavoidableto notice the opposing parallel of growinglevels of extreme wealth. It is often in suchquandaries of disparity, that there lies theopportunity to make an investment. Withthe growing share of such prosperity seem-ingly going to the worlds richest, it comeswith little shock that certain luxury markets,such as fine wine (that offer benefits to bothparties - rich or otherwise) remain busythroughout the world. Especially in China,where such divisions are quite common andmillions are hunting for investment oppor-tunities. Quite simply, the fine wine invest-ment market suits their social and economictaste.

To say the pockets of all those concerned,or those considered to be within the 1% ofour world’s wealthiest, are limitless in theirfunds, would be both obtuse and imperti-nent, but they are certainly well supportedin the current climate, and are financially ca-pable of expansion. According to a new re-port by Wealth-X and UBS, China’sUHNW (ultra-high-net worth) tier by indi-vidual wealth, totals an impressive $1,515billion dollars alone, and those individualsworth $500 million or more, now own 40%of that wealth, up from 37% in 2012. A fi-nancial disparity is seemingly increasing fur-ther within China. “The more unequal asociety, the greater the incentive for the richto pull up the ladder behind them”, says TimHarford – ‘Undercover Economist’ andcolumnist for the Financial Times. As thegrowing ‘ultra-high-net worth’ of the BRICeconomies keep climbing, an ambitious ap-

petite for luxury and wealth retention hasemerged. With it, superior and sometimeselitist levels of purchasing power.

A 2013 Chinese Millionaire Wealth Report- an annual report of the wealthiest individ-uals in China published by The Hurun Re-port, seemingly offers further incentive toanalyse China’s investment mentality. Thepublication is a monthly magazine bestknown for its “China Rich List”. It includesa vast amount of statistical information abouthow private wealth in China is growing atan unimaginably fast rate and how these in-dividuals are choosing to invest their money,and most relevant to wine, how they are alsochoosing to “gift”. Interestingly, as the re-port points out “the gifts which are mostcommonly given to wealthy Chinese menare watches, followed by red wine”. Perhapsmore interesting still, is the fact that ChateauLafite Rothschild is the only wine brand inthe top 15 preferred brands for gifting bymale millionaires, coming in at No. 10 be-fore Armani and Prada. Lafite first came tothe spotlight in China after the famous HongKong movie star Chow Yun-fat uttered thelines, “uncork me a bottle of 1982 Lafite” inthe 1989 movie, ‘God of Gamblers’. Sincethen, Lafite has attained cult status and isseen as a symbol of status and wealth. Butsuch widespread popularity, huge demandand limited stock availability has made even

the most frivolous millionaire or billionairesit up and take note of the very obvious in-vestment potential in Lafite and the otherwines within its class.

A reservation to all this however, is if pric-ing is moved beyond what conventions willbear. Though, in that situation all that willhappen is that individuals will subsequentlybe forced to broaden their scope beyond thefinest premier cru for a while, and there ismuch to appreciate beyond the fields of‘First-Growth’. The risk of being priced outof the market has always been present, butfor those fortunate enough, this has alwayspresented opportunity. It still surprises mehow frequently it just comes down to howbadly someone wants it - and if it is the bestwine in the world, many will. That is a sen-timent that still translates globally, despiteany financial or political encumbrance.

Senior Market Analyst Daniel Paterson and Account Manager Oliver Waghorn

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