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Bordeaux Pricing: Mixed Messages?

Interesting to follow up on my post last week entitled Boom and Bust? concerning forthcoming Hong Kong auctions and the reined-in expectations for how the wines would sell. The weekend just passed saw these auctions take place and the predictions were unsurprisingly accurate, perhaps even not pessimistic enough. Last year the sales netted over $34 million, and the projection for this year’s Chinese New Year sales was $23 million. In the end the sales netted just $18.7 million, reported here in Bloomberg News.

Talk of millions of dollars spent on wine never seems real to me; the wines traded at these auctions – for example, 1870 Lafite-Rothschild (the provenance was good on that one – kept at the château until 2003), a case of 1990 DRC and so on – are way out of my reach. Nevertheless, although the sum spent here is more than I will earn in my entire lifetime, it is still a massive drop – nearly 20% down on estimate, and 45% down on last year’s takings.

Of course these are different sales, of different wines, so its not quite the same as the Liv-Ex indices (which track the value of specific wines over time) falling, nevertheless the finding still seems significant. Two comments from the piece are worth noting:

“Wealthy Chinese and other collectors focused on the very best older vintages and Burgundies such as DRC Domaine de la Romanee-Conti at Hong Kong weekend auctions, passing on other lots in anticipation of further price declines this year.” – indication that this market continues to turn away from Bordeaux, focusing on Burgundy instead. Some wines – such as 2003 Lafite-Rothschild – went unsold. It wouuld be interesting to see a breakdown of what sold, and what didn’t.

“In general, today was cheap but I think there will still be a correction.” – a comment from one “collector” (terrible word). Clearly, market confidence is falling.

Contrast this, however, with recent moves in the 50 index from Liv-Ex, which seems to have stabilised a little in the past two weeks. A mixed message, it seems? I’m not so sure; we may see this slide further in coming weeks once the news of this poor performance at auction sinks in.

Postscript: See more detail, including top lots and hammer prices, on the Wineyields website.

Boom and Bust?

A Bloomberg report today highlights several forthcoming auctions in Hong Kong which will test the market for highly traded (and highly expensive) first growths, which should be of particular interest as a follow-on from my post late last week, China Coughs, Bordeaux Trembles?.

Hong Kong has become a wine hotspot in recent years, primarily consequent upon the abolition of a previously hefty tax on wine sales. Several major auction houses now have a presence there, and forthcoming events include auctions by Acker, Merrall & Condit, Sotheby’s and Zachys. Last year, report Guy Collins and Frederik Balfour, the pre-Chinese New Year sales netted over $34 million, but projections for this year are already way down at $23 million. Of course, that all depends on the quantity and quality of the lots on offer, but I think it very likely that this more restrained outlook is largely due to falling wine values, as revealed by the recently published Liv-ex 100 data for the end of 2011 (see post linked above).

It will be interesting to see if the fall is universal, suggested tightening belts and closed wallets, or if there is a swing away from Bordeaux (the sales include large formats of Petrus and other frenzy-inducing delights) and towards Burgundy (DRC in particular features), suggesting evolving tastes and changing interests. I look forward to seeing the reports; not because I’m suddenly fascinated by wine and finance combined, but I’m certainly eager to learn of falling fine wine prices.

On a perhaps related issue, this story on the BBC news website is tangentially related. It notes that Barclays Capital have concluded that skyscraper construction appears to come in waves that precede periods of depression. Whether this is true or not I don’t know (surely there are skyscrapers being built all the time?) and the association may be rather weak, and of course a banking group might just be a tensy-weensy bit biased when it comes explaining why there is a global recession ongoing, but the article does note that of all the world’s tall buildings currently under construction, over half are in China, which has certainly seen a huge boom-time recently. And after the boom…comes what?