Few of us realise that fine wine has been traded for profit in other parts of the world for over 500 years. While investing in fine wine has barely caught on in Malaysia, investors in Singapore and Hong Kong are fast becoming some of the major buyers per capita of premium wines in the world.

Investor planning to research and evaluating the investment potential of fine wines may be a put off as it is a challenge for novices. However, you can start by looking for the most reputable wines of the best vintages. These wines are highly sought after, and investors can be quite certain that demand will outstrip supply in the future.

According to the Australian Wine Index (AWI), the consumption and appreciation of fine wines in the Asian region have increased significantly in the past three to five years.

This is likely because of a growing number of wine lovers per capita in Singapore and Hong Kong compared to Western countries, and Asian wine lovers tend to go for the best when it comes to investing in them. AWI moved its headquarters to Singapore five years ago and has around 1,500 clients in the Asia-Pacific region today, with more than half of them in Singapore.


The Value of Fine Wine

	Kasler : If you choose the right wines, you can get a potential of an average 12% to 15% capital growth each year net.

A Such a trend is expected to continue and include large growth markets such as China, where wine consumption is expected to increase at a rate of about 35% per annum over the next decade.

So, what's the value proposition of investing in premium wines? Says Jeremy Kasler, managing director of Australian Wine Index: "There are two contributing factors to this; firstly, fine wine improves with age and therefore in value. If stored correctly at 15 degrees Celsius and 70% humidity, wine will improve over a period of time for up to 50 years for the best results."

Secondly, wine is a finite commodity. AWI sells some wines that are produced in tiny quantities, some as low as 600 bottles per year. As each bottle is opened and consumed, the remaining stock becomes more valuable.

Some of the preferred Austral-ian wines include Penfolds Grange, Clarendon Hills Astralis, Cullen Diana Madelinne and Elderton Command. For instance, Penfolds Grange is one of Australia's most highly regarded wines.

It is interesting to note that the value of a premium wine goes up every time someone pops open a bottle. Says Kasler: "If you choose the right wines, you can get a potential of an average 12% to 15% capital growth each year net."

On a more cautionary note, he advises investors to deal with a reputable broker who will demonstrate their track record and some examples of profitable wines.

He elaborates: "A few important factors are good vintage which means you should only buy wines from the best years, a track record of the winemaker while ensuring the production is fairly low at a maximum of 24,000 bottles or 2,000 cases of 12.

"Most importantly, look for wines that have received high marks from influential wine critics such as Robert Parker Jnr, James Halliday and Jeremy Oliver. Wine consumers the world over tend to follow these critics, therefore if they say a wine is great, the demand will rise accordingly."

Kasler notes that his company allocates its clients an individual broker whose job it is to update, educate and generally keep the client well informed on the market conditions. It also holds wine tasting events with the world's top winemakers.

He adds: "If you are looking for good unrated wines, the best idea would be to look for winemakers who are starting a new project but who previously have made very highly rated wines. For example, we were the first company in the world to sell Mollydooker wines which in their first vintage rated a score of 99/100 and 96/100. This led to the price doubling almost overnight."

The most expensive wine AWI has sold is Penfolds Grange - one of Australia's most highly regarded wines.

Things to Note for Investors
It is important to note that an investor should set aside some funds when investing in wine for shipping, insurance and three years of storage. In addition, some companies such as AWI, assist clients in placing wine portfolios on international markets such as the US and Europe, and sometimes through auction houses such as Christie's and Sotheby's.

Experts contend that wine is an attractive alternative to stocks, as it may even reduce the volatility of your overall portfolio of stocks. Top-grade wines seem to have little fluctuation in their values, and they tend to have little in the way of downside volatility.

Investors should obtain regular updates on the capital growth performance of their wine portfolios. Furthermore, they should receive "buy" or "sell" recommendations based on sales figures from auctions or retail prices worldwide, the performance of the wines' past vintages and international reviews and ratings given by influential wine critics.

Most investors have a portfolio of investment options such as shares, unit trusts and property. However, these days some executives and managers are also allocating a significant proportion of their portfolio in fine wine, even over 50% of their total investments.

Typically, an initial investment would be around S$10,000 and the investor will usually familiarise himself with a range of fine wines by attending wine tastings and appreciation classes.

For example, AWI provides fine-wine sourcing and investment advice. One investor purchased his first label, which was a case of Torbreck Descendants 2001, followed by Parker Terra Rossa First Growth 1999, then Clarendon Hills Astralis 2000. He then sold off the Parker and Clarendon for about 20% profit. He now has as much as S$80,000 invested in wines now.

Such investors are part of an expanding group in Asia, says AWI. The Sydney-based company, set up in 2002, moved its base to Singapore in 2003 because it observed that there was a spike in demand in wine buying and collecting in Asia.

AWI acts as a brokerage for its clients, accessing premium, rare, hard-to-source vintage Australian boutique wines for them. The company now has around 1,500 clients in the Asia Pacific today, with over half in Singapore.

Clients invest at least S$10,000 - shipping, insurance and three years of storage included - and the wines are kept at the temperature-controlled Cougar Warehouse in Boon Lay Way. These investors do not have to pay taxes as long as their bottles don't leave the warehouse.

Aside from European wines, AWI also notes that Australian wines are becom-ing more serious players in the market with the country's first en primeur sale this year by Penfolds, which sold its 2004 Bin 60A and Block 42 before bot-tling, much like futures.

Finally, an added benefit of investing in fine wine is that investors need not worry about speculating on wine as it is a commodity that has blue-chip, cult and emerging categories.