China puts trust in wine

Wine investment hit the headlines this week as China’s largest bank launched the country’s first wine trust.  It is hoped that the trust, aimed at private banking and enterprise clients, will attract investors wanting to diversify their portfolio at a time when the stock market is in the doldrums.

The Industrial and Commercial Bank of China, better known as the ICBC, led a syndicate composed of China National Cereals, Oil & Foodstuffs Corp and Zhonghai Trust Co Ltd in the first round of fundraising, which will see up to 98 million yuan invested in the trust.

Ma Xutian, deputy general manager, financial markets, ICBC, told the China Daily that the trust “has been more than double oversubscribed”. The wine trust will be measured by the “barrel” (each barrel contains 300 bottles of wine) with investors limited to a maximum of two barrels of wine. The investment period will be 18 months long, with an annualized investment return of around 8 percent.

“Wine is less volatile than stocks and shares, making it a less risky investment. Moreover, it is not highly correlated with the stock market, which makes it attractive to investors looking to diversify a portfolio. However, as such investment usually requires a special expertise, it is more feasible for banks to bring in the third party to run such wealth management products,” Ma added.

Fionnuala Synnott 16/07/08