Drink and spend, spend and drink

It's the holiday season, and time to celebrate. Typically that would mean breaking out the oranges, but nowadays it also means popping open a bottle of wine.

Traditionally, in the days before Chinese New Year, it is important to get those last-minute repairs done to your home, to do some spring cleaning in an effort to sweep away any residual bad luck from the previous year, and perhaps hang some festive paper cuttings on your front door. 

You might stock up on fresh bank notes to stuff into your Laisee packets of lucky money and fill your refrigerator with oranges and tangerines -- which symbolise wealth and good fortune -- to hand out to children and guests.

But apparently, in recent years, a new trend has emerged -- at least among a small group of wealthy individuals -- of investing in fine wines ahead of the festivities.

"Demand from Asia increased with Chinese New Year looming," explained Miles Davis, a partner in Wine Asset Managers, a specialist manager of funds invested purely in the fine wine market. "We experienced this first-hand, selling cases of [Chateau] Lafite '82 at £27,000 ($42,100) and [Chateau] Lafite '86 at £12,000 directly to Hong Kong and Singapore-based merchants." These prices are 10% and 22% above valuation, respectively.

Wine Asset Managers was founded in December 2005 by Davis and William Beck and remains a totally independent entity. It currently manages The Fine Wine Fund, a membership scheme focusing on the joint investment in, and ownership of, fine wine, and The Fine Wine Investment Fund, an offshore mutual fund that aims to achieve annual double-digit growth for investors through the ownership and trading of fine wine.

As of the end of December 2009, the Fine Wind Fund returned 25% since its inception in September 2006, while the Fine Wine Investment Fund is down 6% since September 2007. In January, The Fine Wine Investment Fund rose 3.9%, while the Fine Wine Fund was up 4.4%.

Davis explains that buyers of fine wines in Asia tend to consume their purchases rather than store them for a later date. This is good for dealers who don't mind regular customers. And it's good for funds that are dependent upon demand.

Ever since Hong Kong eliminated wine duties in February 2008, there's been a noticeable rise in wine collecting (for consumption and storing). There were 14 major wine auctions last year that fetched an estimated $64.3 million, contributing to Hong Kong surpassing London as Sotheby's second largest market, behind New York.

"In terms of the impact that markets such as China can have on the fine wine market it is still very early days," Davis said, but he added that it is a trend worth watching.

After all, the very expression red wine is auspicious. The word in Mandarin is hong jiu. Hong is the word for red, which for the Chinese symbolises luck and happiness, and jiu has the double meaning of forever, which leads to the notion of happily ever after.

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