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
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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)
