The Liv-ex bid:offer ratio has risen above the 100% level this week for the first time since July 2010 with the Liv-ex Fine Wine 50 index also rising 1.33% to 268.41 since the beginning of the year. Over the last week, the value of bids on the exchange has also risen by £1 million. Historically a bid:offer ratio above 50% tends to indicate an uptrend in the market, or at the very least acts a signal for price stability.
The last time the Liv-ex bid:offer ratio moved above the 100% level was during the China led bull run that saw Bordeaux prices reach record highs. While on the surface these developments all look like bullish indicators for the fine wine market, there are a number of factors that put recent events on the exchange into context.
Recent currency movements have definitely been a driver behind trade on the exchange with the Euro strengthening against Sterling from November, helping to push the Liv-ex 50 index higher. The average bid:offer spread is also at a wide 20%. Historically a level below 15% has been an indicator of sustained price rises. In addition, anecdotal evidence suggests the majority of sellers still remain on the side lines, having just returned from the seasonal holiday.
In the build up to the forthcoming En Primeur campaign and with the market appearing stable, it will be interesting to see if any of these bullish indicators will have a longer-term impact on the fine wine market. So perhaps it’s too early to call a directional shift, but the current buy side build is certainly difficult to ignore.
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