OREANDA-NEWS.Hong Kong sparks Bordeaux's return to favour in fine wine market.

The fine wine market has an impressive long-run performance with a compound growth rate of nearly 10% since 1990; however, recent years have seen uncharacteristically high volatility. The market has experienced a significant correction as large institutional investors exited and excess supply pushed prices lower; by the summer of 2014 the fine wine market was looking back on almost 40 months of declining prices taking aggregate prices down by over a quarter. Today, the BI Index is at the same level as early 2010 and prices for many of Bordeaux's blue chip wines are back to 2005/2006 levels.

As a result of this challenging retrenchment, the fine wine market is now in more robust health than it has been for many years. A positive outlook is emerging as stock overhangs have been worked out of the market and real, export-driven demand is picking up again. Significantly, Bordeaux, the market's barometer, is returning to favour. Whilst collectors and investors have looked towards Champagne and Burgundy for greater value in recent years, it appears the fine wine market is returning to its roots following the results of Sotheby's auction of Chateau Mouton Rothschild in Hong Kong.

Mouton Rothschild's first ex-chateau wine auction held in Sotheby's Hong Kong Gallery fetched a total of US\$4.1m (HK\$32m / ?2.7m), more than double its pre-sale estimate. Previously one of the less-traded First Growths, with the exception of the iconic 2000, BI has seen a significant increase in demand for Mouton in 2015 - particularly after the rescoring of the 2005 by the market-shaping critic Robert Parker (the wine rose from 96pts to 99+pts, sending the price up 35% in a matter of weeks). Overall in 2014, BI saw the sales of LiveTrade wines increase 22% on 2013 and a 28% increase in Asia. This influx of sales of top Bordeaux in Asia gathered pace throughout the year, with BI predicting the green shoots of a recovery in the summer of 2014.

Commenting on this emerging trend, Guy Ruston, Managing Director of BI Hong Kong said, "We saw new ground broken with some astonishing prices achieved at Sotheby's Ex-Chateau auction of wines from First Growth Mouton Rothschild. With DRC, Henri Jayer and other rare Burgundies hogging the limelight it's been a while since such dizzying prices have been realised for top Bordeaux. Indeed we have to go back to the now infamous Ex Chateau Lafite auction in 2010, where buyers merrily paid such incredible premiums to market. Boasting perfect provenance, paying a premium for mature vintages such as '45, '59, '61 and '82 is explicable but paying 2 or 3 times market price for contemporary vintages, barely out of the Chateau, a la 2009, 2010 and 2011 is staggering.

"This particular Mouton auction was a perfect storm however as demand for Mouton in Asia over the past quarter has far outstripped that of any other Chateaux and with the Lunar New Year being that of the Ram, Mouton's emblem, the wines of Mouton Rothschild were practically guaranteed to be a hit with the local tycoons, collectors or bon viveurs. That said, the wider market conditions must also be taken into context as one reflects on these numbers. Back in 2010, the Ex-Chateau Lafite auction took place during the greatest bull market for Bordeaux we have witnessed. Fast forward to 2015 and after nearly 4 years of falling prices, failed wine funds, waning interest in en primeur and an Asian market that is a little older and a little wiser, then the back drop to last week's auction couldn't be more different.  

"Of course it would be naive to consider these prices a new benchmark for the market but it is further evidence of Bordeaux's resurgence. With the BI Index up nearly 2% in January and inventory looking stretched it increasingly looks like we have seen the bottom of this market. Where it goes next remains to be seen, and while it's perhaps too early to be a bull, it's mighty tempting to bet on the Ram".

Gary Boom, BI's Managing Director, continued, "There is no doubt the fine wine market is in a better state than it has been for many months and investor confidence is returning. With a healthy market we are expecting new trends to emerge over the coming years but we would be most surprised to see the kind of dramatic oscillations previously seen by the arrival of Asia.  We anticipate a reversion to the classic model of a consumer-led focus on coveted and valued wines that are ready, or nearly ready, for the table as well as young wines with a strong story that appeals to both future consumers and investors alike.

"The 2005s are a great example - and not just because of the recent Mouton upgrade. At 10 years old, these wines are finally starting to show their true potential and as our recent "10 Years On" retrospective tasting showed, they really are something very special indeed. We have seen a significant increase in demand for the '05s and we expect this to continue."

Established in 1997, Bordeaux Index has grown to become one of the leading global fine wine merchants and traders. Founded by South African-born Gary Boom, BI's aim is to make the world of fine wine accessible to a broader audience. The Company has offices in London, Hong Kong, Singapore and Los Angeles, as well as a rapidly growing international customer base. This year BI were awarded 'Bordeaux Specialist of the Year' at the International Wine Challenge Merchant Awards.

BI was responsible for the launch of LiveTrade in 2009, which is the world's first online trading platform for fine wine. The platform, which has firm bid and offer prices available 24/7, won the Company "Innovator of the Year" award at the 2009 International Wine Challenge.

LiveTrade wines are the top 150 most liquidly traded Bordeaux wines, which make up the market on the LiveTrade platform. These include the First Growths (Lafite, Latour, Margaux, Haut Brion and Mouton Rothschild), selected other Crus Classes from the Left Bank and the leading wines of Pomerol and St Emilion including Petrus and Cheval Blanc. LiveTrade wines range from selected vintages from 1986 - 2010.

'The Bordeaux Index' is a real time index that tracks live changes in the prices of the most liquidly traded wines on LiveTrade. The technology facilitates dynamic, daily updates on the market and is the most transparent, accurate and simple way of gauging the market performance of Bordeaux.