NFTs: Future of investment or another bubble waiting to burst?

The world is now divided into two types of people: those who invest in NFTs and those who don’t. As mind-boggling as it is, an increasing number of people now use digital currency to purchase digital goods – or rather the certificates that legitimises ownership of said items – without ever having to physically touch them at all.

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5000 days NFT artwork by Beeple

NFTs have been around since 2014, but they were relatively low profile before the end of the decade. They really began sweeping the internet last year, when this novel technology went mainstream and disrupted industries across the board, especially the art world. The NFT landscape has rapidly evolved over the past 12 months, with more institutions around the world and some governments recognising cryptocurrency as legal tender and NFTs as strong investments.

Even a traditional international art auction house like Sotheby’s has launched its own Metaverse dedicated to NFTs and digital art. So, those few who still staunchly prefer cash in hand might just have to come to terms with this new digitalised transaction that is revolutionising the financial, investment and creative sectors.

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Cryptocurrency and NFTs: What’s the difference?
An NFT (non-fungible token) is a unique digitalised certificate that entitles one, and only one, person to exclusive ownership of an asset. Cryptocurrency is a peer-to-peer electronic cash system, such as Bitcoin, Ethereum and Doge, used to purchase NFTs. Blockchain is the platform on which all cashless digital transactions happen. The process is calculated by a large group of computers and recorded publicly, but anonymously, on the internet to ensure everything adds up. This provides transparency and avoids human error or the risk of financial mismanagement.

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Yet, the use of digital ownership tokens remains controversial. While championed by artists and tech-savvy investors, others are cautious, citing a volatile, unregulated marketplace. Environmental campaigners, in particular, decry the huge amount of energy they eat up. What does that mean for Hong Kongers looking to invest in NFTs? And is embracing crypto a positive move for society? We break down the pros and cons…

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Andrew Mok’s debut solo exhibition at Shout Art Hub & Gallery, Hysan place

Democratising art and the value of scarcity
NFTs spurred a creative boom for developers and artists last year. Helping to democratise art, they allow creators control and ownership of their created content while also sharing deserved revenue, and offering involvement in a community of like-minded individuals. The key takeaway here is that NFTs are one-of-a-kind, non-fungible and certified original tokens of an object, whose value is dictated by the community, not an institution or an art market.

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NFT artwork by James Jean Forager

Pro: They certainly benefitted Hong Kong high schooler, illustrator and graphic artist Andrew Mok. Also known as Offgod, Mok is a cover artist for social media rappers such as Bella Poarch, The Kid Laroi, and the late Juice Wrld. He was invited to do an NFT exhibition – his first solo exhibition – at Shout Art Hub & Gallery in Hysan Place – a gallery dedicated to NFTs and digital art and providing global support for local artists. “Offgod’s skill is very mature and creative with his own style and he has over 200,000 followers on social media from all over the world,” says gallery founder Christopher Tang. “The feedback from the market exceeded my expectations. We sold every art piece by the end of the first week – and some pieces pre-sold before the exhibition opened, which for a [then] 17-year old local artist is a miracle.”

Con: Difficulties arise when talking about value and how volatile the NFT marketplace can be. Unlike stocks or bonds, there is no way of knowing the intrinsic value of an NFT investment. What makes a successful NFT largely depends on how the popularity of the brand is, and how strongly the community feels about it.

The scarcity principle used in economics, social psychology and manipulating consumer behaviour theorises that greater value is placed on items that are scarce or in low supply, but in the case of NFTs, it is perhaps the exclusive ownership of a token that creates value rather than the uniqueness of the object itself. Why else would crypto entrepreneur Sina Estavi pay US$2.9 million for Twitter CEO and founder Jack Dorsey’s first tweet?

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Pushing the boundaries of technology

There is one thing that is undeniable about the technology behind blockchain and cryptocurrencies, and it is that it has pushed the boundaries of how society and systems utilise computers for the purposes of validation and verification. As evidence by the 2008 financial crisis following the collapse of Lehman Brothers, there is room for error and risk of mismanaging financial systems when regulators are in a position to control funds.

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Pro: Blockchain technology is a complex system that allows for strong security since it acts as a shared, immutable ledger; it is almost impossible to hack, alter and manipulate because all transaction records are publicly documented, in contrast to transactions conducted on traditional platforms.

Cons: However, ideal and utilitarian the blockchain is in theory, without the middleman or an institutional buffer between consumers and retail, NFTs leave investors vulnerable. Their value is volatile, and there is still the potential for fraud, scam and theft during transfers within the NFT marketplace, despite the security of blockchain and the anonymity it allows. The process and language can be complex as well, especially for those new to the NFT scene.

If the goal is to truly democratise blockchain and the NFT market for the masses, the exponential growth will require an institutional buffer to aid buyers and investors to oversee the marketplace, as risk in their trade is still very much present.

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Bored Ape NFTs by Bored Ape Yacht Club

Future or fad?
Whichever side one stands on the debate of NFTs as the future of investment, there is no denying the good they have reaped for artists and creators, inspiring them to take the lead in how their own creations are presented in the market. Artists have been enabled to deal directly with buyers and control the revenue they earn, while building communities of like-minded individuals with the same interests, fostering a positive and empowering influence for creators.

However, there are fears that a new law that will come into effect next year will stymie the growth of cryptocurrency in the city. The new legislation states that virtual asset trading platforms will face regulations and be monitored through a licensing system to prevent illegal activities, particularly money laundering. This will undermine the main point of decentralising, but perhaps it is a middle ground both sides can come together on.

Wine & Investments: An interview with Auctioneer Simon Tam

Food lover, passionate scuba diving instructor, wine expert, Christie’s alumni, founder of Aeos Auctions – Simon Tam is a man of varied experiences and a wealth of knowledge. We caught up with the seasoned auctioneer to learn about his craft and relish in his lively character…

Was there one particular glass or moment that sparked your love of wine?
I come from a family of restaurateurs and grew up in our restaurants in Australia – good food, good wines, good company, laughter and conversations were the norm for me. I often thought to myself, ‘What an interesting industry to get into.’ My surroundings made me adventurous with food and wine. I love trying new tastes, and the sights, sounds and smell of a working kitchen have always fascinated me – they still somehow evoke the deepest part of my memories. When you’re surrounded by food and wine as a child, it leaves an impression.

Infamously, I not only tried wine for the first time at 13, but also spiked it with Coca-Cola! It was the early ’80s, and I happened to ‘borrow’ a bottle of 1961 Château Lafite from my mother’s cellar and had my first sip. I instantly loved the smell, though not so much the taste. The moment I added Coke, I knew it was going to be my life-long poison [laughs].

I was in high school when I first made wine. My friends and I had a pact that in the winter holidays we would teach skiing and in summer we’d make wine. That was a turning point for me, and I haven’t looked back; I think wine is the only thing I know.

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How did your journey evolve from opening Hong Kong’s first wine school back in 1996 to founding Aeos Auctions last year?
Amazing. The wine industry is a melting pot of generous, kind, and funny people from different cultures and parts of the world. I’ve been very fortunate with mentors in my career and my decades of professional experience which have prepared me for running an auction house – it’s been a fulfilling, fun learning journey.

Tell us about your 10 years at Christie’s and how this shaped you today as an auctioneer?
[In 2010] I was the first Chinese appointed as the Head of Wine at Christie’s in Hong Kong. I started with the China market, which was growing rapidly in the fine-wine sector; it was a great honour to be heading the ever-expanding China team, and then my role grew to head wine for the whole of Asia.

As an organisation, Christie’s is amazing – the client service experience is second to none, people are passionate about their jobs, and there’s an incredible amount of knowledge and expertise in all departments. I am grateful for the rich learning environment I got to be in. I discovered that the business of auctions is exhilarating – it gave me butterflies each time the gavel came pounding down on the podium.

What are the best as well as the worst aspects of your profession?
The best aspects of the wine and auction industries are the people – the passion, the motivation that drives people to understand, taste and collect wine is exemplary. It doesn’t get mundane – no two days are the same; there’s always something new to learn and some of the best, most colourful and kindest people I’ve met in life are wine lovers.
The worst part, I would say, is an empty bottle [laughs]. But there’s always another one…

“There’s always something new to learn [in the wine industry] and some of the best, most colourful and kindest people I’ve met in life are wine lovers”

Any underrated wines which people should know about and appreciate?
Now, I am tasting and drinking a lot of New Zealand Pinot Noir – it’s one of my favourite grapes; Sauvignon Blanc may be New Zealand’s calling card, but the country has built a formidable reputation for handling this Burgundy grape remarkably well. Winemakers there have been mastering this fickle grape from more than 20 years, and I am absolutely smitten. The region’s cool climate gives an impressive and eclectic depth, purity, freshness, complexity and exoticness to the variety.

You’ve been in the industry for more than 30 years. Can you reveal the best business advice you’ve ever received?
I’ve been mentored by several people at different times in my career, and everyone had something valuable to say, but the advice that stood out for me was from my mother. She said, ‘Treat everyone the same way – a janitor or a CEO.’ That’s the most beautiful life lesson for me; when you are capable of doing anything in life, the least you can do is treat people with kindness. It has certainly helped me make a lot of genuine friends in and out of this industry.

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Jacket, button-up shirt, pants and shoes by Brunello Cucinelli

What denotes a fantastic food and wine pairing?
Now we’re talking! I grew up in an environment of food, wine and laughter, but I took it ahead and decided to explore how Asian food pairs with wine – an Indian sabzi, Thai green curry, Vietnamese pho, chilli-laced noodles… Asian food runs a gamut of flavours, and the standard wine rules don’t always apply. Sometimes red meat and red wine work, sometimes white meat and white wines work, but the world is so much more diverse than that.

Some of my pairings are unorthodox – I love spicy food and instead of drowning out the chilli, I want the wine to exaggerate the drama. If I wanted my wine to dull or flatten the spice, I might as well have bland food, no? I also feel that the finest food and wines should be reserved for the highlight moments of your life, so for weekends and regular get-togethers find wines that fit your lifestyle and match the occasion.

“Some of my pairings are unorthodox – I love spicy food and instead of drowning out the chilli, I want the wine to exaggerate the drama”

Since you’re so passionate about food and wine, is opening a restaurant in the pipeline?
Hospitality is in my blood and I love the industry, but much to my parents’ disappointment, none of their three boys carried on the family business. I like the idea of having my own restaurant, but it’s way too much hard work – whenever everyone else is chilling and having their downtime, like Christmas or New Year, you’re working. I’ve lived that life and made a conscious decision to have some balance.

Tell us about your other passions.
That would be underwater photography and scuba diving. I am an accomplished scuba diving instructor but, wait for it, I can’t swim. I am extremely skilled in water; I know my buoyancy, but I just can’t swim long laps. Being underwater is paradise – it’s such a thrilling and a humbling experience; a true realisation that the universe is majestic and you’re a tiny, tiny part of it. Both underwater photography and scuba diving bring balance and a diverse perspective to my above-ground life.

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What brings you happiness in life?
Laughing with my son. He’s 15-years-old, remarkably intelligent – I can’t take credit for that – has a very good sense of humour and is a gorgeous human being. I just love being with him, laughing with him, and we have a delicious time together.

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Jacket, button-up shirt, pants and shoes by Brunello Cucinelli

What are your vices?
I can’t be left alone in a supermarket – I just can’t be trusted with a wallet and a shopping cart! I am an obsessive, impulsive kitchen and gadget shopper. I absolutely love to cook and entertain – in fact, I eat out only for work purposes – so I cannot do without a fully functional pantry. And when I’m in a supermarket, there’s always this urge to buy extra for dinner with friends, or an impromptu party at home…

If you could have any wine with any cuisine tonight, what would it be?
I would drink my own wine. I made it before leaving Australia and my godparents have kept a stock, pair it with my godmother’s Brien Stew and Suet pudding. It’s outrageously delicious! Reliving my childhood, my happiest days, while sipping my own wine – now that’s home for me.

Thank you.

 

(Interview by: Nikita Mishra; Photographer: Jack Law; Art Direction and Styling: Jhoshwa Ledesma; Videographer: Kes Lei Venue: Aeos Auctions Office)

Million Dollar Sneakers: Insanity or investment opportunity?

A Sotheby’s private auction held just over a month ago set a new record – that of the most expensive sneakers ever sold. The collectible in question was a pair of Nike Air Yeezy 1 Prototypes worn by rapper Kanye West in 2008 at the 50th Annual Grammy Awards, and fetched a staggering US$1.8 million. Outrageous? It may seem so to outsiders, but in fact, it is just the latest milestone for the burgeoning phenomenon that has come to be known as ‘sneaker culture’.

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Sneaker culture thrives on the same mass collecting mentality that can be found for other collectibles like watches and wine, although in this case, it’s applied to the purchase and ownership of cool sports shoes. Be it stellar marketing, social media popularity or the influence of hip hop culture, there is now an entire sub-section of the fashion industry where coveted kicks reign supreme.

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In truth, sneakers are nothing new. They first appeared back in the early 19th century, though unlike modern-day iterations, these were quite roughly crafted from canvas, featured rubber soles, and were mostly marketed as beachwear. It took nearly six decades for this flimsy footwear to become more refined and eventually capture the mass market’s interest.

As for etymology, unsurprisingly, they got their name simply because they were nearly inaudible underfoot, allowing wearers to quite literally ‘sneak’ up on you. The interesting fact is that sneakers emerged in early ’20s Germany, where an intrepid entrepreneur by the name Adi Dassler invented the first real sports shoe. It was clearly a success, and his company evolved into Adidas, one of the most recognisable athletic wear brands. However, it was in 1984 that sneakers became a status symbol. This was the year Nike collaborated with basketball superstar Michael Jordan and changed the world of sneakers forever.

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In the intervening decades since that Damascene moment, the sneaker industry has grown beyond imagination, currently grossing an eye-watering US$60 billion each year, with that value predicted to grow to some US$95 billion within the next four years. What’s more, hundreds of millions are also spent by sports brands in continuing efforts to tempt buyers with ever-more exciting designs.

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Heightening their popularity even further are the numerous multi-million-dollar collaboration deals that have sprung up between major brands like Adidas and Nike and celebrities such as Kanye West and LeBron James, binding fans from the worlds of sport, music and fashion.

The name of the game, in short, is to add to the prestige of what’s available, even, or maybe especially, when applied to a utilitarian accessory. Everyone can have a pair of Adidas shoes. Buying Yeezys, though, is akin to hitting gold. Also, with the entry of countless luxury design houses – Louis Vuitton, Gucci and Versace, to name but three – into the industry, sneakers have become even more of an aspirational accessory, enticing the wealthy elite to buy into the craze.

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The recent record-breaking performance by the Nike Air Yeezy 1 Prototypes is, perhaps, the greatest indicator of this. But it is by no means the only pair of sneakers to reach stratospheric prices. Sotheby’s inaugural 2019 sneaker-dedicated sale saw a pair of Nike Waffle Racing Flat Moon Shoes sell for US$437,500. A year later, a pair of autographed, game-worn Nike Air Jordan 1s sold for US$560,000, which held the Guinness World Record until it was superseded by Kanye’s kicks this April.

But while not all ‘sneaker heads’ – as aficionados of this sporty footwear have dubbed themselves – can afford one-off designs at such staggering prices, it hasn’t stopped the most dedicated from attempting to amass as many pairs as they can afford. Take, for instance, US musician DJ Khaled, who is rumoured to own 10,000 pairs and even managed to collaborate with Jordan Brand – created by Nike for legendary basketballer Michael Jordan – to put his own spin on the Air Jordan 3s.

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Another of the world’s biggest sneaker collections is actually in the hands of three 20-something sisters, Ariana, Dresden and Dakota Peters. Together, the trio own over 6,000 pairs of sneakers, including thousands of coveted designs such as Nike Air Force 1s and Air Jordans, as well as rare prototypes designed for celebrities and star athletes, and even a few whose existence have perplexed their maker, Nike. In total, the collection, which they inherited from their retired real-estate developer father, is said to be worth millions of US dollars.

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Sneakers continue to appeal to consumers across the wealth spectrum, but, as with the rest of the fashion industry, sustainability and environmental concerns have definitely made an impact on this niche sector. And, when you look at the facts, these worries are surely justified.

Sneaker production is exceptionally carbon-intensive, accounting for about 1.4 percent of all global greenhouse gas emissions (as compared to air travel, which in pre-Covid times produced 2.5 percent of such emissions). If it were a country, it would be the world’s 17th largest polluter. Furthermore, each year, some 23 billion pairs of sneakers are produced – often under exploitative conditions – and simultaneously, 300 million pairs are tossed into the rubbish pile. Given that many sneakers are predominantly fabricated from plastics or plastic-like materials, the devastating truth is that it will take decades for them to fully decompose in a landfill.

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This is a major environmental issue, but there are ways to deal with it successfully, and one of them is switching to sustainable and ethical production as priorities when looking for stylish kicks. A good example of this is Adidas, who started making inroads into sustainable production in 2015 by utilising recycled ocean plastic in its products. It also launched Futurecraft Loop, a groundbreaking sneaker design that is made from 100 percent reusable thermoplastic polyurethane, a substance that can be repeatedly recycled after use. A growing list of brands has followed suit, focusing on creating footwear that is both ethically and sustainably produced.

Whether or not the entire industry can shift its mindset to a greener, more environmentally friendly production process is still up for debate, but it’s a problem that needs a real, long-term solution, especially given the continuing, unabated rise of sneaker culture across the world.

Collectible Investments: Opportunities to grow your portfolio…

Unlike vintage wine, classical art and centuries-old antiques that can cost an arm and leg to invest in, alternative collectables such as whiskys, sneakers and the burgeoning NFTs are easier (and relatively less expensive) to enter into the market and starting investing in now for higher returns in the future. Here are six types worth considering…

  1. Whisky
    In over an eight-year period, the value of single malt whisky has risen by 361.09% in value with particular interest in rare and special edition collections. Last October the oldest Japanese whisky Yamazaki-55 fetched a whopping HK$6.2 million while a collection of six-special edition Macallan single malt whiskys went under the hammer for an astounding HK$20.65 million, proving to be a lucrative investment.
  2. Chinese antiques
    Chinese antiques such as rare porcelains, jades, sculptures, bronzes and traditional works of art and calligraphy spanning 4,000 years reflect a rare part of Chinese history and heritage that is highly valued for its provenance and the fact that many of these artefacts were produced by high-ranking officials or housed within Chinese imperial quarters. Sotheby’s alone held a total of 23 live and online auctions across 3 continents for Chinese Art which altogether realised over US$193 million last year. With sales of Chinese art and antiques surging over the last decade, investments in Chinese traditional art and antiques have proven to be of high value and worth in the marketplace. 
  3. Vintage handbags
    Vintage handbags, dating over 20 years back, are known to fetch a sum on auction blocks. According to the Knight Frank Luxury Investment Index, handbags performed better than art two years ago, profiting with 13% gain in overall returns. World renowned luxury houses such as Hermès, Chanel and Louis Vuitton are known to have produced limited and highly exclusive hand bag models, such as Hermès Birkin, Chanel Flap Bag and Louis Vuitton Neverfull, often going under the gavel for hundred thousands and even millions (USD). 
  4. Comic books
    Once deemed as a pastime for the pre-pubescent, comic books — particularly rare first editions — have burgeoned into an unexpected investment opportunity in the last year or two. Their investment value have seen jaw-dropping returns such is the case of the record-breaking DC Comics Superman-debuting Action Comics #1 from 1938 which sold for a staggering HK$25 million, while the original artwork of the fifth instalment of the Tintin series from 1936, The Blue Lotus, fetched a whopping HK$31.75 million.
  5. Sneakers
    When it comes to the hypebeast culture — specifically sneakers —the truth of the matter is that although these footwear, at face value, don’t hold much value in themselves, their demand in the market have driven its worth through the roof. Rare or limited edition sneakers commonly resell for over 50 times its original cost. A case in point is the latest sale of a Yeezy at Sotheby’s, the original Nike Air Yeezy 1 that was worn by the artist Kanye West himself during his performance at the 50th Grammy Awards which sold for a jaw-dropping US$1.8 million, and this is just one example of many sneaker editions that have made headlines in the past.
  6. NFTs
    Non-fungible tokens are unique and new to the world of investment yet it is the talk of the town. One-of-a-kind and irreplaceable certifications of authenticity of any digital work from musical albums to digital art have proven to be worth millions at auctions as seen by the ground-breaking sales of two digital works in two different areas of the creative industry. Digital artist Beeple’s Everydays: The First 5,000 Days collection of illustrations went under the gavel for nearly US$70 million at Christie’s, while American producer and DJ 3LAU’s Ultraviolet music album fetched an astonishing US$11.7 million, and it is not likely to stop there.

Block Trooper: Jehan Chu, founder of blockchain venture capital firm Kenetic

Long a supporter of blockchain and cryptocurrency technologies, Jehan Chu now helms Kenetic, a venture  capital firm helping others looking to break into the industry.

Kenetic is an interesting business. As its founder and managing partner, how exactly do you define it?
Essentially, it’s a venture capital firm, one that supports start-up companies at a very early stage. In particular, we help to fund entrepreneurs in the blockchain sector, while also providing them with advice and guidance, allowing them to realise their visions of the technology’s future. I firmly believe that blockchain represents the next stage in the evolution of the internet – a new technology that will underpin developments over the next 50 years. With that in mind, Kenetic is a bespoke vehicle designed to help facilitate that evolution.

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At what point did you decide the time was right to launch Kenetic?
We opened Kenetic in 2016 when it became apparent that no Asian venture capital business was really focusing on blockchain technology. At the time, those of us who had first ventured into the bitcoin and blockchain space knew something special was
taking place. We also believed that, without support, it wouldn’t necessarily fulfil its potential. That’s where Kenetic comes in – we support those people crazy enough to try and make their dreams come true. 

What was it about blockchain / cryptocurrency that first drew you in?
Well, while I was studying International Relations at Johns Hopkins University, I taught myself how to code html. After that, I went to work in New York coding as a front-end developer during the first dot.com boom. In 2013, I first came across Bitcoin. Once I started researching it, I immediately fell down that particular rabbit hole. One of the things that drew me to Bitcoin was my love of decentralisation and the idea of returning power to the people. I soon started a number of related communities, including a local Ethereum group, one of the earliest such associations in Hong Kong, as a means of helping to provide investment advice for those interested in the sector. In 2016, I went fulltime, leaving my job as an art dealer to focus solely on providing blockchain and cryptocurrency investment advice.

gafencu people interview Jehan Chu, founder of blockchain venture capital firm Kenetic (2)

Why do you think cryptocurrency has become such an attractive investment option?
When I started out in cryptocurrency, nobody wanted to hear about it. It was, at best, a joke and, at worst, seen as somehow improper. Now, though, it seems as though everyone realises how important cryptocurrency is, especially with regard to decentralisation. If you look at what’s happening in the world right now, centralised systems are failing, making decentralisation seem an increasingly appealing prospect. Even companies like UBS, JP Morgan, Visa and PayPal are turning their attention to Bitcoin and cryptocurrency. It took a little time but it’s happening. 

“ Kenetic aims to support people crazy enough to try and make their dreams come true”

Aside from Bitcoin, which other cryptocurrencies do you see as significant?
While Bitcoin is really a payment token or a store-in value token, Ethereum is an application-based blockchain with easily the largest community of developers and applications. Bitcoin is akin to gold, where Ethereum is more like oil – it is used to power things, whether an engine, a machine or a factory. The other interesting one is Polkadot, which is similar to Ethereum but has a very different approach in that it’s really trying to create a network of blockchains. 

What are the some of the most common cryptocurrency misconceptions that you encounter?
A lot of people think that as cryptocurrency is not “backed” by anything, it doesn’t have any intrinsic value. This is inherently untrue. The value of Bitcoin and other types of cryptocurrency stems from the subscription and investment of the community, both in terms of dollars and effort. This infuses cryptocurrency and blockchain with value, be it in terms of its use in applications or in having a multi-million-dollar market cap. Basically, they are backed by millions of people who say there is value and are willing to put their money and commitment into them.

gafencu people interview Jehan Chu, founder of blockchain venture capital firm Kenetic (3)

You co-founded Social Alpha Foundation, a blockchain / social impact non-profit. What can you tell us about its aims and ambitions?
I was raised by my parents to be very generous and try to support communities. As a result, I have always thought it was important never to take anything for granted and to use my resources to help others. In line with this, the idea behind Social Alpha Foundation is to support blockchain projects that are looking to create social impact. The first grant we made was to a small start-up in South Africa, which was providing official identity documents to children who were either too poor to apply for them or were refugees. What they would do is use blockchain technology to track these kids and verify an identity for them. Right now, though, we’re focused on environmental issues and have recently given a US$250,000 grant to Open Earth, a Yale University initiative aiming to use blockchain to help combat climate change. 

In terms of cryptocurrency-friendliness, how do you see Hong Kong ranking on the global scale?
Hong Kong is easily one of the most significant centres in the world when it comes to blockchain and cryptocurrency and is probably the most important such destination in Asia. This is partly because the regulation is very engaged here and the regulators
are very knowledgeable. The entrepreneurial spirit is also very strong and there are a lot of start-ups, especially in the financial sector. There are also many people in institutional and more traditional companies across a variety of different sectors that have become engaged with blockchain and cryptocurrency. All in all, I think that I’m very fortunate to be in Hong Kong as there’s just so much going on here in terms of both cryptocurrency and blockchain. 

gafencu people interview Jehan Chu, founder of blockchain venture capital firm Kenetic

You also invest in alternative proteins, notably Impossible Foods…
That’s largely because I have been going mostly vegan. I do what is called a 95-percent diet – depending on which week it is, I have only one or two animal protein meals in a seven-day period, staying vegan for the rest of the time. The fact that this has boosted my own health made me want to invest in initiatives such as Impossible Foods, as well as other alternative protein sources. My cholesterol has gone way down; my sleep,
skin and digestion are all better and it’s good for the planet too.

You are also big on meditation…
I actually practice Vipassana, an ancient breathing practice favoured by Buddha as the root of mindfulness and all other forms of meditation. When I was first introduced to it, it was quite a challenge – I had to undergo 10 days of silent retreat without 
reading, using a phone or having any human contact. During that time, though, I learned how to quieten my mind, focus and use breathing to achieve a state of centeredness and hyperawareness. While it’s one of the hardest things I’ve ever done in my life, it also transformed it in a very positive way. 

 

Thank you.

 

Interview by: Roberliza Eugenio
Photos: Jack Law
Video: Andy Wan
Art Direction & Styling: Jhoshwa Ledesma

 

Burgundy En Primeur: Are wine investments a good idea?

After 2016’s paltry Burgundy harvest, Robin Lynam ponders the merits of investing in valuable wines before release

Few of the grape-growers of Burgundy will look back on 2016 with fond nostalgia. Lulled into a false sense of security by a mild winter, the region was hit hard in the spring – first by unexpectedly severe frost, and then by hailstorms, compounded by unusually heavy rain. The quantity of the eventual harvest was drastically reduced.

That’s bad news for the many wine lovers in Hong Kong and China who in recent years have turned to Burgundy rather than Bordeaux when buying premium priced French wine, but at least the quality has turned out to be much better than had been widely feared thanks to a hot early summer which helped the vines to recover, and fine weather during the harvest itself.  

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In some ways that just makes it all the more painful that there isn’t enough to go ‘round. Just over 163 million bottles are available from 2016, which, against an average calculated over the last 10 years, means production is down by about 20%.

Smaller quantities of course mean higher prices. The Burgundians are traditionally less prone than their Bordeaux counterparts to overcharge for their wines, but they too have to make a living, and if there is less to sell, then they have to ask more for it.

So should Burgundy lovers be looking at buying 2016 wines en primeur – before release – rather than waiting to see what prices are when the vintage has been shipped?

The rules have changed in recent years. Although not the only region to invite customers to invest early in wines at a supposedly lower price than they will later command, it was Bordeaux that made en primeur a major element of its marketing.

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As demand from Chinese buyers for the top Bordeaux wines went through the roof in the early years of this century, so did the en primeur prices. Customers who had bought with the idea of possibly turning a profit on at least some of the bottles found themselves holding cases worth less on the open market than they had paid for in advance.

The market has since adjusted, and provided you are buying high quality well known wines wisely through a reputable wine merchant, Bordeaux en primeur now looks once again like a reasonably attractive idea. But that period of inflation disillusioned some wine lovers, many of whom turned instead to Burgundy.

Burgundy en primeur has generally been less about price than about obtaining an allocation year after year as a preferred regular customer. During these times of strangled supply, if you want to obtain some of the better wines, en primeur is almost the only way.

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Bordeaux and Burgundy are talked of so often as though they were two sides of the same coin that people tend to forget that even in years when Burgundy is not beset with frost and hailstorms, the quantities of wine the region produces still amount to only a tiny fraction of Bordeaux’s output.

Either region can experience bad weather and a reduced harvest, of course, but Bordeaux has more than 120,000 hectares under vine by comparison with Burgundy’s just under 30,000.

In Hong Kong and China much of the interest in both regions is focused on the red rather than white wines, and in this area too Bordeaux’s production dwarfs Burgundy’s. Still, white wines account for around 61% of Burgundy’s total production, and sparkling white Cremant de Bourgogne, which is often a very acceptable alternative to Champagne, represents another 11%. That leaves just 28%, and although that is mostly red, rosé accounts for some of it. Burgundy is 50% planted with Chardonnay to just 41% Pinot Noir.

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“The question of volumes is inescapable,” says Adam Bruntlett, who has succeeded Jasper Morris MW as the Burgundy buyer for Berry Bros & Rudd. “While we have been well looked after by suppliers thanks to our longstanding relationships, there are many instances where volumes are limited.”

With strong pressure on prices and volumes, this, suggests Bruntlett, is a time to start looking beyond the Grand Cru vineyards. He points to lesser known producers and areas of fine but much less famous terroir which produce wines that don’t command the same stratospheric prices, whatever the weather has been like in any given year.

“The 2016 vintage is the time to look beyond the bigger names and consider lesser-known villages such as Marsannay, Santenay, St Romain and Auxey-Duresses,” says Bruntlett. The 2016 Burgundy white wines, he notes, generally have a fresher, more classic feel than their richer 2015 counterparts.

“Some frost-affected vineyards display a more angular profile, but many of these filled out over the course of the autumn barrel tastings and will continue to do so with further élevage [a wine’s adolescence or education]. The very best white wines will come close to matching those of the 2014 vintage.”

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For Chablis lovers, says Bruntlett – and you can’t really enjoy seafood and not love Chablis to go with it – the bad news is that quantities are severely down. As for the 2016 reds, in general Bruntlett finds them more consistent than the whites, and worth considering at all quality levels from Grand Cru down to everyday casual drinking.

“Across the board, the wines display an unmistakably Burgundian Pinot Noir fruit character. They offer a beguiling paradox of initial rich fruit on the front of the palate and succulent acidity on the finish, leaving one delightfully perplexed as to whether this is a warm or cool vintage. The very best wines are the equal of the 2015s – albeit in a style that will appeal more to the traditional Burgundy drinker,” he says.

Berry Bros has a good range of red and white Burgundies available to its Asian-based customers across a range of price points. Other well connected wine merchants able to offer a reliable en primeur service include Altaya, ASC Wines, and Watson’s Wine.

Terroirs et Signatures de Bourgogne / Photo: Anthony Upton

Still shopping for a few cases from the Grand Cru vineyards? “Clos Vougeot and Vosne Romanee experienced a very good vintage,” says José Lau, Private Sales Manager for Berry Bros & Rudd in Hong Kong. He too recommends buying en primeur.

“Supply and demand play a big role in why en primeur makes plenty of sense for Burgundy. There has been a huge increase in Burgundy drinkers in the past 10 to 12 years which has driven prices up again and again. Buying early will save you money down the road – and you might even use it as an investment to gain some.”

 

This article appears on Gafencu Magazine’s March 2018 print issue entitled “Burgundy En Primeur” by Robin Lynam

Justerini & Brooks MD entices and educates at exclusive wine event

With over 260 years under its belt, Justerini & Brooks’ expertise in fine wines is legendary. It boasts a portfolio of over 3000 different vintages and holds upwards of £200 million of wines for its customers. Last week, oenophiles were treated to an exclusive tasting of standout vintages from J&B’s current portfolio at the Grand Hyatt Hong Kong.

J&B’s Managing Director Chadwick Delaney was on hand to lead the tastings, which showcased a titillating variety of wines from Bordeaux, Burgundy, Rhone, Germany, Italy, Spain and more.

Wine enthusiasts will easily recognise the more famous French vineyards on display: Chateaux Margaux, Pichon Lalande, Chateau de Meursault, Rene Rostaing, etc. But Delaney also educated attendees on upcoming regions such as Piedmont, and relatively unknown (at least in Hong Kong circles) producers such as Bernhard Huber in Baden, Germany.

The latter is a perfect example of J&B’s ability to judge and select bottles with unique provenances for its clients. Bernhard Huber’s 2014 Bienenberg Spätburgunder Grosse Gewächs, one of the bottles selected for last week’s event, has seen prices increase by a staggering 300% in just one year.

So if you’re an aspiring collector or a seasoned wine investor looking to expand your private cellar, a gander at the Justerini & Brooks website or chat with one of its experts may be worth your while!

Text: Tenzing Thondup

Investment Tips: Where should investors put their money?

Where should we be putting our money during this period of record highs? Gafencu’s investment advisor Emrys Gould gives his two cents’ worth

Equity markets around the world are at record highs. The Hang Seng index is poised break the 29 000 barrier, and is at its highest in 10 years.  If we look east from Hong Kong, the Nikkei is pushing 21 year highs and the S&P is continuing to flirt with record highs. If we look west, the FTSE in the UK and the Dax in Germany are also at record highs.

What should investors do? At times like this many of us start getting a little edgy, “what goes up must come down” and all of that.

A fall’s going to come, they always do, the only question is when. The indications are it might be soon(ish). Central banks are starting to unwind the quantitative easing which pushed markets to such highs, the Fed is reasonably likely to hike rates again in December, and, linked to all of this the US dollar is set to start rising again. As it does, liquidity would be likely to flow out of emerging markets and back to the US, hurting valuations.

The big question of course, is when is this going to happen. The Fed has been raising rates all year, and we’ve not seen a correction yet.

If you know the answer, then what to do with your money is fairly easy. Hold plenty of cash, and if you really back yourself, then in Hong Kong since March of this year there have been a few reverse ETFs in the marketplace. These offer returns inverse to the performance of the Hang Seng index, so buy them just before the market plunges, and you’re in the money.

However, knowing when a market has reached its peak is notoriously near impossible to predict.  Even if you’re absolutely convinced you’re right, the old saw attributed to John Maynard Keynes comes to mind: “the market can remain irrational for a lot longer than you can remain solvent.”

So what do you do if you’ve just received a lump of cash and want to invest it? There is no point putting it in a bank when interest rates are as they are, and equity markets probably still have a few months more ooomf in them which you wouldn’t want to miss. There are some bond funds out there which should do OK when big investors start getting risk averse, but no one would describe them as exciting. Gold? Well maybe, but it’s not that big a jump from buying a sizeable chunk of gold, to buying tinned food and fortifying a shed in the woods, and we’re not there yet.

The answer is probably to keep buying equities. It’s a cliché, but in the US, if you invested in the S&P 500 at its peak in 2008, and held on to everything you owned, you’d be back in profit by 2013, and well ahead by now. The same isn’t quite as true in Hong Kong, and since we’re not quite at a peak yet, then the thing to do is to keep buying. The question is what.

If you’re Warren Buffet, then keep doing what you’ve been doing: finding companies whose strong fundamentals aren’t reflected in their price, and investing in them for the long term. But for those of us who have had less success at picking individual stocks, it is rather more a case of finding sectors or areas that might outperform the market as it peaks. 

There are a few options. One thing to consider if you think that rising interest rates are going to put an end to a stock market boom are those few sectors that do well in a rising rate environment.

Banks would be one option, as when rates go up, they can get higher returns on any deposits they have sitting around in savings accounts that they haven’t been able to lend out more profitably. This is particularly true for the big Hong Kong banks. HSBC and Bank of China Hong Kong have vast lazy balance sheets, and higher interest rates go straight to their bottom line. The case is different for those mid and small sized mainland banks who have invested more than 100 per cent of their deposits in whatever bit of the Chinese shadow banking system is in fashion at the moment, but a peaking market isn’t the only reason to steer clear of those.

What about the stocks to avoid? Research by China Constriction Bank International Securities found that tech companies in Asia like Japan have fallen by an average of 25 per cent in the six month period either side of a market peak. The big Hong Kong listed tech companies (really we mean Tencent) might be all right with most analysts still saying buy, but the handful of smaller Chinese tech firms that Charles Li and the Hong Kong exchange managed to lure to Hong Kong rather than the Nasdaq are worth steering clear of.

Other poor performers by CCBIS’ analysis were materials and industrials, which also dropped by high single digits. The best performers, along with financials were energy and real estate stocks.

Energy certainly sounds like a reasonable bet at the moment when it comes to companies listed in Hong Kong with the Belt and Road Initiative likely to provide long term support for both new and old mainland energy firms. The Chinese authorities’ hope to be a green energy superpower continues to be a secular boost for newer forms of energy.

CCBIS’ advice seems sensible. Holding financials, energy and real estate as the market peaks looks like a reasonable thing to do.

Text: Emrys Gould

For the full article, please check out Gafencu’s November issue or the Gafencu app. Download the app from the Google Play Store or Apple App Store