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market report

Liv-ex is an electronic exchange for fine wine. Market Report is part of a package of services offered to subscribers of Liv-ex, with subscriptions starting at £49.95 per year. Below is just a brief extract from the latest Market Report. Sign-up with Liv-Ex at www.liv-ex.com

Liv-Ex Market Report

by Liv-ex.com, August 2012

Trading

Typically a quiet month, August's exchange turnover fell by only 1.2% on July, and the volume of trades by 5.8%. Nevertheless, turnover was down 40% year-on year, largely caused by a drop in value rather than in volume: the number of trades was down just 9.4% on August 2011. The 2009s have dominated Bordeaux trade since February, but their 18.7% of turnover in August was topped by 18.9% for the 2000s. Several perfect-scoring Left Bank 09s - Montrose, Cos D'Estournel and Leoville Poyferre - saw good volumes of trade, while a few large trades of Latour 2000 meant the wine made up 10.6% of all Bordeaux trade. While Bordeaux's trade share fell to 82.7% (compared to 94.5% in August 2011) Burgundy's growth spurt continued, with the region taking 8.2% of turnover, up six percentage points on this time last year. Champagne also saw brisk summer trade, while Italy's share dwindled to 1.7%. Following several months of losses, the Liv-ex Indices regained their footing in August. The Liv-ex 50 concluded the month at 297.12, up 0.17%—a feat not seen since March. Posting its first monthly gain (of 0.43%) since February, the Liv-ex 100 ended on 258.78, down 9.6% year to date. The Bordeaux 500 posted the largest increase of 0.7%, while the Investables remained static.


(more analysis in the full report)

Major Movers

August mix: There was little trend in this month's major movers, as buyers cherry-picked from the good and great. The perfect Bordeaux 09s continued to make waves, with Pichon Baron taking top spot. The top-scoring 2005 vintage of Pape Clement 2005 also proved appealing at just over £1,000 per case. As did the drinkable VCC 2002, which looks cheap when compared to recent vintages.


(analysed in detail in full report)

Critical Corner

James Suckling reviewed his 100 top Tuscans of the year so far, based on over 1000 tastings. Most of the tasted (and highly scored) wines were from the 2009 vintage, which Suckling labelled 'a beautiful year'. Nevertheless, it was a 2008, Castello dei Rampollo D'Alceo, that received the best—and only perfect—score. Suckling extolled the wine, describing it as 'truly perfect.' Sassicaia and Solaia 2009 also featured among his favourites, as he praised the former for being 'complex yet subtle', 'full and powerful'. Of the wines from the Liv-ex Super Tuscan index, only Tignanello's 2009 vintage scored under 95—awarding it 93, Suckling advised, 'Give it a year or two to soften.' A selection of his top wines is below.


(more analysis in full report)

Final Thought: where do we head next?

After a year of almost unrelenting bad news, the late summer has brought the market some much needed respite. All of the Liv-ex indices posted small increases for the first time since February, as prices stabilised and then started to creep up. August is traditionally a time when the wine market slumbers, so this uptick could be explained away as a pause, rather than a turn. But, if we take a closer look at the data, are there any grounds for cheer as we move into the final third of the year? A key metric for gauging market confidence is the ratio of Bids to Offers on the Liv-ex exchange. Historically, this ratio falls during periods of market stress. Looking at Chart 1 - which tracks it against the Liv-ex 50 - it is apparent that when the ratio reaches around 0.5 (the total value of Bids is at least half the total value of Offers), the market tends to rise. A ratio of below 0.5 points to market stress and a fall in prices. Indeed, in the weeks immediately following the demise of Lehman brothers in October 2008 (a month in which the Liv-ex 100 fell 15%) the ratio reached an historic low of 0.04, as buyers fled the market. The low point in the current correction was hit in December 2011 when the ratio stood at 0.17 after six months of falling prices, although early June 2012 ran it close at 0.18. The current trend is looking more positive, with the ratio creeping up from its June low to hit 0.43 by month's end. The total value of Bids hit a four month high, despite much of the trade being away from their screens. The Liv-ex 100's 0.4% rise in August is the most visible sign of this increase in confidence. As shown below, technical chartists would point to the psychologically important 250 level, the high point of 2007, providing a point of resistance. The Liv-ex 100 is currently sitting just a few points ahead of this. It would be wise to remember, however, that we have been here before—just six months ago. The bounce we saw in January and February 2012 proved just a pre-cursor to a renewed slump. If history repeats itself, the bad news is that a technical analysis might point to the next point of resistance being 200 - a drop of a further 20%. To put this into context, wines such as Lafite 2005 would hit £6,000 a case, well under half its peak pricing of £12,500, while the 100-point Margaux 2003 would go under £300 per bottle for the first time since early 2007. Nevertheless, market stress is currently much reduced and the balance between buyers and sellers has improved. In part, the early-year rally was derailed by an extremely poor En Primeur campaign, with high prices and low demand hitting the gentle sense of momentum the market was starting to build. As the year progressed the marker also had to contend with the peak of the euro crisis and an increase in fears of a slowdown in China. As such, there appears to be a lot of bad news already priced into the market. It is surely too early to call the end of the now year-long correction, but it may just be time to look forward with a hint of optimism. The next few months will prove decisive.


(detailed analysis in full report)