CHEERS: Wine tasters at a Hong Kong exhibition. More people in Hong Kong and the mainland are acquiring a taste for fine wine, even as scrapping the wine tax will make better quality wines affordable. -- PHOTO: AFP

But Hong Kong Financial Secretary John Tsang had more than aficionados in mind when he abolished the tax last week during his budget speech.

The move cost the government HK$560 million (S$100 million) in lost revenue, but he said it would help Hong Kong become an international wine hub earning up to HK$4 billion from trading, storage and auction activities.

Noting that wine spending in Asia totalled at least HK$55 billion, he saw plenty of potential.

The owner of an online wine shop told The Straits Times that the tax cut would encourage more people to appreciate better quality and more expensive wines.

'More people will find it affordable to discover good wine,' said Mr Bertrand Jubault, who runs www.wineshop.hk.

He now sells a bottle of Champagne Michel Gonet for HK$250, from HK$288 previously, and a Chateau Cabannieux for HK$169, down from HK$199.

'Wine is going to be big in Hong Kong, especially as more mainlanders come to buy,' he said.

Another sign that Hong Kong is onto a good thing - the demand for wine on mainland China has been going up and up.

Sales there shot up by more than 65 per cent between 2001 and 2006, and are expected to rise a further 40 per cent by 2011.

China's wine imports are projected to leap from slightly more than two million cases - of 12 bottles each - annually to about 50 million by 2017.

Analysts say that China's new passion is already driving up global wine prices.

Hong Kong's own wine collectors and investors cheered the news that the tax was being scrapped. Because of the high tax here, many had refused to bring in their collections, preferring to store them elsewhere.

They reacted immediately to Mr Tsang's announcement.

Mr Greg De'eb, who owns the upmarket wine storage facility Crown Wine Cellars, said he received 'hundreds of orders' right away from people who wanted to bring back the wine they had been storing in London.

The wine expert estimated that as many as 100,000 cases of wine - a tenth of the estimated one million cases currently stored overseas by Hong Kong residents - will return.

'It would be absolutely ludicrous for people to miss out this chance to bring wine, at no duty or sales tax, into a city with such potential,' he said.

Mr De'eb said that he is shelving plans to set up a similar storage company in Singapore because Hong Kong now has the advantage.

'The impact is phenomenal,' he said. 'This has enabled Hong Kong to leapfrog over many cities like Singapore to be the next big international wine hub.'

While Hong Kong abolished its wine duties, Singapore has just introduced a sliding tax scale that rises with alcohol content.

Traders believe the change in Singapore will not make much difference to the retail price of an average bottle of wine, which was previously levied at a flat S$8.50 per litre.

While Hong Kong's move certainly benefits consumers - wine is expected to gradually cost less in the coming months - its sights have been set on bigger fish like collectors and investors who buy in bulk.

Financial institutions in Hong Kong, such as SG Asia-Pacific's exclusive private banking arm, have also moved in to tap the growing mainland market by setting up wine funds, with investments managed by wine experts.

Hong Kong's move is a logical one, wine industry players say, given its close ties with the biggest merchants in Europe.

Indeed, Hong Kong buyers - including a rising proportion of rich mainlanders - accounted for 20 per cent to 25 per cent of global fine wine auctions that totalled some US$300 million (S$417 million) last year.

The United States' oldest wine merchant will start auctioning fine wines in the city in May, in what is viewed as a boost to Hong Kong's reputation in the business.

'More and more of our auction business is going to Asia,' said Mr John Kapon, president and auction director of the New York-based Acker Merrall & Condit.

The 188-year-old family business sold a bottle of 1945 DRC Romanee-Conti for US$41,825 in May last year. In January 2006, it auctioned a case of 1971 Romanee-Conti for US$136,000.

Such activity is likely to rise, industry sources said, with respected London wine auctioneer Bonhams, as well as Christie's, also looking to get in on the act.

Wine trader Alan Chiu agreed that all these developments point to a sparkling future for the business here, but he lamented that just a small portion of mainlanders really appreciate wine.

The result is that ignorant buyers have left themselves exposed to the tricks of unscrupulous businessmen, said the co-owner of wholesalers Cornerstone Distributors.

'I hear of mainland traders who buy really cheap wine - as low as HK$20 per bottle - in Hong Kong by bulk to sell back home for as much as 300 yuan (S$59),' he told The Straits Times.

'A lot of Chinese buy because it makes them look rich, and they get attracted by the nice labelling on a bottle, or the fact that the wine comes from exotic France or Spain.

'So in the end, some pay way too much for low-quality wines. They are the future of the business here, but, like good wine, this market will need some time to mature as well.'

vincec@sph.com.sg