S'pore investors aim to uncork fine wine profits

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It's risky when the papers blatantly push for wine investing without stating the costs of such investments, and also without qualifying the long-term return for such investments! 500% returns is downright misleading!

The Straits Times
Sep 5, 2011
S'pore investors aim to uncork fine wine profits

Growing number lured by gains of up to 5 times initial outlay, say brokers

By Melissa Tan

A GROWING number of Singaporeans have taken to investing in fine wine, lured by heady profits that can be as high as five times the initial investment cost.

This is according to wine brokers, who say Singaporeans are among their most enthusiastic clients.

Managing director of wine brokerage Australian Wine Index (AWI), Mr Andrew Bassett, said three out of four of his 3,000 clients are Singaporeans.

These include 'many doctors, especially surgeons, lawyers, engineers, even some hawker stall owners and taxi drivers', said Mr Bassett, whose company has $80 million worth of wines stored here.

He added: 'Every day the number (of consumers) is growing... We found that Singaporean consumers have really taken to wine, especially good reds.'

And the rising interest in wines is not for the sake of consumption, but the huge investment returns they can potentially bring.

According to Mr Bassett, a client of his bought a 2005 red Australian Shiraz wine called Mollydooker Carnival of Love for $115 in 2007. A year later, it was worth US$600 (S$720) on the market.

Of course, not all bottles rack up such dizzying returns, but Mr Bassett says wines make decent 'medium-term' investments, and can keep for up to 50 years.

'Our return was 12 per cent to 14 per cent per annum prior to the global financial crisis,' he noted, adding that he asks his clients to invest over a period of five years at least.

A recent auction of some of AWI's Australian wines at China's Guopai auction house in Shanghai late last month fetched gross profits of as high as 52 per cent, despite this being China's first Australian wine auction.

Wine investors buy through a wine brokerage, which typically recommends good investment wines, arranges storage and insurance, and eventually helps sell them.

AWI makes money by taking a commission of 5 per cent on the profit from each wine trade and from buying directly from vineyards, as well as charging a fee for insurance and storing the wines.

The brokerage's minimum requirement for wine investment is a sum of $10,000, but most of its investors put in about $50,000 to $150,000.

But there are risks as wine is not the most liquid of assets, and investors may find it hard to find buyers.

And the price of wine is 'governed by weather, sun and rainfall, and the whims and fancies of wine critics', said local wine expert George Wong.

Investors may see the value of their assets falling, not rising.

Mr Wong noted that Singaporeans also have a strong preference for French wine.

'French wines still occupy the top spot in Singaporeans' perceptions, because of France's long association with wine,' Mr Wong added.

Mr John Kapon, chief executive of New York- based wine auctioneer Acker Merrall & Condit, told The Straits Times that Singaporean clients made up 5 per cent of the company's total sales revenue in Asia over the past three years.

It mainly auctions French wines, which Mr Kapon said make up the 'majority of fine and rare (wine) sales and auctions'.

'Singapore is an exciting market with great potential. It is developing as an offshoot of its incredibly robust neighbour, Hong Kong, and will certainly expand in the years to come,' he said.


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