Hong Kong's Wing Lung Bank launches a wine financing service

Hong Kong's Wing Lung Bank 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.

"People in Hong Kong and China have become more knowledgeable over their favourite wines. All of these help raise people?s interest in investing or purchasing wine, resulting in the growing demand on wine financing services."

But if they are looking for a place to shelter from the headwinds buffeting the global economy, Asia's new wine speculators might be disappointed. Wine prices have fallen about 15-20 percent this year, according to Wickens.

"This is a market correction. It's not a bubble bursting or another disaster in the market, and we still see some wine going up in value, such as the Domaine de la Romanee-Conti and Petrus," he said.

"Wine is not just a piece of paper, it's a physical item. It has some tangible value, it's unlikely to go zero," he added.

Investors are advised to put their money away for the medium to long term, and target batches of young wines at their initial release price.

Wickens said certain "blue-chips" like the Mouton Rothschild 2006, which currently fetches about HK$6,300 (US$800) per bottle, and Chateau D'Yquem 2007, at HK$4,000 a bottle, could return 25-30 percent after three years in a cellar.

"For a 2004 bottle of Lafite, which is not a great vintage -- two years ago it was selling at 5,000 pounds ($8,000) a case and now it's about 8,000 pounds. Even though it's not a great vintage, it has good return," he said.

The wine can also be bought "en primeur", where a specific vintage of wine is bought before it is bottled and sold in the market two or three years later.

"It's becoming increasingly interesting to consumers, it's an alternative investment," said Geordie Willis from the Hong Kong unit of Britain's oldest wine and spirit merchant, Berry Bros & Rudd, which has supplied wine to the British royal family.

He said the tight supply of fine wine, due to the limits of how much can be produced each year, make it a scarce commodity.

"It is a product which is improving in terms of quality, diminishing in terms of quantity and the market is enlarging in terms of the size of the customers," he said.

"There are more companies coming to us and there are more private investors who are trying to diversify their portfolio. It's growing all the time."