Far East investors try wine for better returns

Chinese and other investors from the Far East are piling into fine wines, traditionally a preserve of European and American buyers, as they seek to diversify away from traditional investments such as equities, experts say.

Premier Cru Fine Wine, Europe’s leading fine wine investment house, has reported a rising level of interest from Chinese, Japanese and Filipino buyers. The sudden rise in the popularity of wine as an investment in the Far East is partly because of the burst in strength of China’s renminbi and Japan’s yen against sterling, according to portfolio specialists at the London-based company.

Such investors have also been attracted by the relative strength of the wine market against the stock market in recent months and the historical outperformance of wine as an asset class in previous economic downturns, they say.

There has been a huge increase in wine consumption in China in the past five years, according to Gavin Saffer, of Premier Cru Fine Wine Investments. “Chinese palates are slowly but surely adapting, learning the complexities attached to wine and, accordingly, wine has become a greater understood commodity,” he said. “In light of the economic downturn, wine has rapidly moved from a status symbol to a serious asset opportunity. The Philippines, the third-largest wine-drinking nation in Asia, has opened the world’s second-largest wine storage warehouse, and the wine investment market has taken off, with investors looking to those with specific knowledge and contacts for investment advice.

“Investment in wine over the last seven years has produced an average annual return of 16 per cent, easily outstripping the performance of Western stock markets over the same period.”

Mr Saffer said there were also signs that Far Eastern investors regarded wine as less vulnerable to fraudsters than traditional stock market and banking-related investments.

He added: “Japanese investors are now placing significant orders with leading wine investment companies, in order to take advantage of the ‘ripe’ market conditions. Due to its geographic positioning, London is the capital of the wine market.”

The most popular wine among Chinese investors appears to be Château Lafite, a vineyard that, traditionally, only the very wealthy could afford, Stacey Lea Golding, managing director of Premier Cru Fine Wine Investments, said. Their second choice is Carruades De Lafite, the second wine of Château Lafite, with Château Talbot and Château Palmer also attracting buyers.

The price of a case of Château Lafite 1982 has risen from £9,500 in June 2006 to £21,000 at present, while a case of the 2005 vintage – “one of the great vintages” – has risen from £3,750 to £6,850 in the same period.