market report

Liv-ex is an electronic exchange for fine wine used by professional merchants and collectors. 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. For the full report and to access Liv-Ex's services, sign-up with them at www.liv-ex.com

Liv-Ex Market Report
by Liv-ex.com, September 2011

Trading

Global economic woes continued to curb First Growth trade in August. Merchants sought value and spread their nets wider, with keen trade in the lower ranks of the Crus Classes boosting monthly turnover by 54 per cent year on year. Nonetheless, price uncertainty put pressure on the Liv-ex Indices and the Liv-ex Fine Wine 100 lost four per cent. Drifting Bordeaux 2008 prices drew ample bids in August and saw the vintage account for a fifth of turnover. Bordeaux 2010 generated 16 per cent of trade and was bolstered by the a renewed interest in Carruades, albeit at a somewhat reduced price. Elsewhere, 2006 and 2007 put in strong performances, recording ten and nine per cent of Bordeaux trade respectively. As usual, the lion's share of trading belonged to Bordeaux last month, with the region accounting for 95 per cent of turnover. Having struggled to find a market in July, Burgundy saw brisk trade in DRC and upped its share to two per cent. Champagne retained merchants' interest, though demand for the Rhone all but dried up. The Liv-ex Indices failed to gain a foothold in August, with the industry benchmark - the Liv-ex Fine Wine 100 - dropping 4.0 per cent to 345. The Liv-ex Claret Chip Index, which tracks the price movement of top-scoring vintages of the First Growths, fell the hardest, descending 4.9 per cent to 420. The index has risen just 1.5 per cent this year - its second-worst performance over this period since 2004.

(more analysis in the full report)

Major Movers

This month's major movers board comprises almost exclusively Right Bank wines - with a double dose of Angelus. After a number of years in the doldrums, prices for many Right Banks appear to be on the move. Notably however, it is the second level of wines - rather than Ausone Petrus and Cheval - that is benefiting. Yet more signs of a switch away from the very top ranks of Bordeaux? Traders tread carefully With confidence (and hence capital) in limited supply, merchants opted for 'lesser” vintages of strong Bordeaux brands last month. As can be seen from the Top 5 table, Super Second Leoville Poyferre 2003 was the month's most traded wine (in value terms), followed by the 2006 of Mission Haut Brion, which started the month at £2,500 but could be picked up for £2,300 by month end.

(analysed in detail in full report)

Watching Brief

Pichon Baron prices have steadily risen in recent months, with the last ten vintages rising in value by an average of 39 per cent in the year to date. Like many of its Super Second peers, the label continues to benefit from a broadening of market demand. Cheaper vintages have proved to be the most profitable, particularly the 2008, which is currently changing hands at £840 and is up more than 60 per cent since December. The 2002, 2004 and 2006 are also making headway and have increased in value by more than 40 per cent each this year. Meanwhile, Solaia and Tignanello are receiving increased attention as buyers dip into top Italian wines. Prices for Solaia have been idle since August last year, though recent vintages of Tignanello are up an average of 20 per cent. As a result, the price gap between the siblings is receding. Having once been 2.5 times the price of Tignanello, Solaia is now double the price (an average of £1,400 per 12 pack). With their combination of good scores and relatively low prices, the wines offer an attractive alternative to Bordeaux.

Final Thought - What goes up?

August saw the Liv-ex Fine Wine 100 fall by more than four per cent, its steepest monthly decline since the dark days of October 2008, when the index fell by 15 per cent following the shock demise of Lehman Brothers. Meanwhile, the financial markets are offering little respite, with equities in turmoil and fears of a double dip recession rising by the day. And it is Lafite - the market's main driver over the past two years - that is leading the market lower. After more than two years of almost uninterrupted price rises for fine wines, it seems that traders are preparing for a correction. Financial market orthodoxy states that those equities that are the top performers in the period running up to a correction are unlikely to be the major movers once again when the market returns to growth. Think technology and telecommunication stocks in the late nineties and finance and property in the mid to late noughties. Reliable and transparent trading data for fine wine has only been available since the millennium. As such, we only have one 'event” (the aforementioned latter half of 2008) on which to test this hypothesis on the fine wine market. Nevertheless, the results are clear. Using the wines in the Liv-ex Fine Wine Investables Index as our set, we find that the five best-performing wines in the 36 months running up to the highpoint of the market (July 2008) were: Lafite Rothschild (up 240 per cent, on average, across all vintages), Ausone (194 per cent), Latour (173 per cent), Mission Haut Brion (166 per cent) and Margaux (136 per cent). The ferocity of the subsequent market fall was relatively indiscriminate, with all of these wines seeing price falls of around 20 per cent by year end - in line with the market average. Yet it is their performance during the market recovery that is more illuminating. If we fast forward 12 months to the end of 2009 then we find that all but Lafite (which once again tops the charts) had increased in price at well below the market average of 18 per cent. Ausone shows the most dramatic switch, with an average price rise of just six per cent between December 2008 and December 2009. But what of Lafite, which sits at the top of both performance charts? If we drill a little deeper into the data, the reasons behind its counter-intuitive behaviour become apparent. In the 36 months to July 2008, the top-performing vintages were 2000, 1996, 1982, 2003 and (for the 18 months previous) the 2005. During the recovery period the top performing Lafite vintage were the off-prime years of 1999, 2002, 2001 and 1994, which all increased in price at more than four times the market average. In contrast, the worst performers were 2003, 2005, 1982 and 1996, which all increased in price at below, or only just above, the average.

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