Wine exchange market booming in China with many winemakers able to borrow significant finances from the capital market

August 21, 2013 Leave a comment

Wine exchange market booming in China

Staff Reporter

2013-08-21

The wine exchange market is booming in China, with many winemakers able to borrow significant finances from the capital market, reports the Guangzhou-based Southern Metropolis Daily. Between 2011 and 2012, investors channeled funds into sought-after wine brands, pushing up their prices to record highs. The price of a special 2012 edition of crystal white wine touched 1,200 yuan (US$196) a bottle in March and closed at 979 yuan (US$159) a bottle during its first trading day. This was a 25.5% jump from the wine’s original price. Some 14,079 bottles of the special edition wine were traded that day, with an exchange rate of 14.08%.But on April 19, the wine closed at 740 yuan (US$120) a bottle, which was lower than its initial public offering price.

These kind of occurrences have become frequent in the white wine exchange market. Many investors have lost a fortune in the market, owing to such strong and volatile rates.

The Shanghai International Wine Exchange was established on June 27, 2011. But a plunge in the market during the first half of 2012 had market regulators imposing safety exit measures — a buyback scheme — to safeguard the interest of investors.

The buyback policy indicated that any newly launched wine could be traded with a closing price of more than 115% of its IPO price for 65 consecutive trading days within a year.

Sellers of the wine could buy back the wine with a 15% price premium within the buyback period.

The policy was implemented to help publishers make the IPO price of their wine closer to its market value, according to regulators.

Experts said the wine exchange market is still relatively new and that it needed time to prove its value.

Filed under Macro Trends

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