Liv-ex 50: Sustainable gains?

The Liv-ex Fine Wine 50 index has been on an upward trend for four consecutive months. This is the first time the index has seen a sustained rise since late 2012 and early 2013. In both instances, the index was boosted by Sterling weakness against the Euro.

The recent uptrend has followed a period when the index ran largely flat. This broke the downward cycle of previous years. It has also led to speculation that the First Growth market is now seeing a more genuine recovery.

In 2012-2013, the rise of the Fine Wine 50 index only served as momentary respite to the five-year correction that followed the 2011 market peak. This rally soon tapered off as the Euro drifted – suggesting that the First Growths were still perceived to be over-priced. The decline of the index then continued until it bottomed out in August 2014.

Current Sterling weakness has largely been driven by political uncertainty surrounding “Brexit” ahead of the UK June 23rd referendum. Year-to-date, First Growth market share on Liv-ex stands at 32%, compared to 30% for the same period last year, and 29% overall in 2015. The Liv-ex bid:offer ratio also currently stands at 131% compared to 54% this time last year. It first climbed above 100% in January. This was the first time the ratio had risen above this level since July 2010.

It remains to be seen, however, whether this momentum will be sustained over the longer-term beyond the current bout of Sterling weakness.