As the bear market takes a chunk of Hongkongers’ stock portfolios, a new auctioneer touts fine wines as full-bodied investments

Madison Holdings Group to launch an auction platform for fine wines, vowing to charge clients low commissions as it enters a market with such heavyweights as Sotheby’s and Christie’s

PUBLISHED : Tuesday, 11 September, 2018, 7:20pm
UPDATED : Tuesday, 11 September, 2018, 10:54pm

A local wine merchant is pitching an alternative investment for Hongkongers feeling a nasty hangover from the city’s staggering stock market: the world’s finest wines.

Madison Holdings Group, whose customers include Michelin-starred Fook Lam Moon restaurant, will announce on Wednesday its launch of a quarterly electronic wine auction.

The first auction will be held on December 15 at the French Window restaurant at the IFC, though investors can bid on the internet from around the globe.

Gabriel Suk, the 38-year-old chief executive of the auction arm of the Hong Kong-listed company, knows he is up against formidable competition. Already, global auction houses including Acker Merrall & Condit, Sotheby’s, Christie's and Zachys hold wine auctions.

But Suk says the company’s better use of technology will enable it to offer lower commissions. And the time is right for a smart new player, he adds, because fine wines as an investment have risen this year, versus the Hang Seng benchmark index, which this week tumbled into bear territory – a drop of 20 per cent from its peak in January.

“There is competition, but we believe we can use technology to allow us to offer a better and cheaper service to our customers. We will offer lower commissions to compete,” he said.

The commission charged to buyers will be 16.5 per cent, compared with the typical 23.5 per cent commission in the auction industry, he said. Sellers will not be charged a commission, which is in line with many auction houses, though some do charge about 10 per cent.

China cultivates a grape-growing region, but it struggles to uncork great wines

“Fine wine investment can provide a good and stable investment return. The price of fine wine goes up as the wine matures, which has made it a good long-term investment,” Suk said.

The Liv-ex Fine Wine 100 Index of the price movement of 100 of the most sought-after wines is up 1.05 per cent this year. Other of its indexes have risen more, such as the California 50 of the top wines grown in the Golden State, which has risen 16.82 per cent, according to the Liv-ex website.

“An auction is an ideal way to allow wine collectors to sell their wine at the highest price in the market. It also allow the buyers to access a lot of fine wine in a simple and transparent way,” Suk told the South China Morning Post.

Suk said the city is an ideal place to launch a wine auction.

Future of wine: how China, climate change and technology will transform the industry

Hong Kong used to have an 80 per cent tariff on wines, but it was gradually done away by 2008. This has prompted a stampede of wine merchants into the city.

Wine imports surged by 80 per cent in the first year. Meanwhile, 850 new wine companies were set up in the first two years after the tariff lift, according to Commerce and Economic Development Bureau. In the first half of this year, imports of wine amounted to HK$6.2 billion (US$790 million), up 9 per cent from the same period last year, and more than three times the HK$1.6 billion value in all of 2007, the government statistics show.

Mariana Lam, the founder of WineWorld Xplorer, an electronic trading platform, said she has detected an uptick in interest from investors who are looking for alternative investments to the stock market.

“Wine as an asset of lower volatility has been used as an alternative investment for a lot of private collectors or even institutions to diversify their portfolio,” Lam said. “The electronic platform boosts transparency on wine prices and stock level in three major global wine markets, which undoubtedly enhances global wine market efficiency, and ultimately liquidity of wine as an asset.”