THE ART NEWSPAPER, No. 237, JULY/AUGUST 2012 Art Market 47
HONG KONG. The strength of theChinese art market, the world’sleading economy for art and an-tiques, has spawned a parallelboom in art funds and other art-investment vehicles worth morethan Rmb5.77bn ($900m), ac-cording to the Chinese-languagepublication Eastmoney.
There are billions more held inart-related products offered by in-vestment trusts and art exchangesthat enable people to buy and sellshares in individual works. Thesehave been embraced by Chinesebuyers keen to broaden their port-folios at a time when traditionalinvestments are performingpoorly and are increasingly sub-ject to government restrictions.
Experts caution that many ofthese vehicles are loosely regulat-ed, that they lack a legal frame-work and that their managers haveno experience of a down market—a pressing concern, given that theWorld Bank is forecasting theweakest growth in 12 years, and aslowdown in China’s economycould signal leaner times for theart trade. “Art investment in Chinais new, and it’s very much ‘makethe rules up as you go along’,” saysBobby Mohseni, the Hong Kong-based director of the art advisersMFA Asia. “It lacks a lot in termsof clarity and compliance, and it’shard to gauge whether the level ofprofessionalism is there.”
New concerns
The explosion of art-investmentvehicles has sparked concerns be-cause they are thought to com-prise a much greater percentageof the art market in China than inthe US or Europe, and a run of re-demptions would force the sale of
Chinese art funds on a risky road to maturityA glut of investment products has mirrored the rise of the Chinese art market, but caution is advised
a huge amount of art. Most fundsoperate with short maturities ofaround two years, which meansthat investors could soon be clam-ouring to withdraw their funds.“Eventually, [these funds] willneed to sell their art to realise a re-turn for investors, and whetherthey will be able to sell their art ata higher price in two or threeyears’ time is a very big risk,” saysIvan Shi, an analyst at the Chinesefund specialist Z-Ben Advisors inShanghai. He says that most of thefunds available focus on modernChinese painting and calligraphy,which has enjoyed the steepestprice increases in recent years.
Funds are said to be active atauctions in China and HongKong, and are rumoured to be
behind recent records includingthe sale of a work by the Chinesemaster Qi Baishi for $65m atChina Guardian in May last year.
Works bought at auction are al-so being sold on to art exchanges,
which offer fractional ownershipto individual investors. Ac cord -ing to local news reports, RenChunxia, a woman from Jinan ineastern China, bought two oil
Hong Kong sales: the party’s winding downOnly very high-quality items are likely to get buyers’ attention
paintings by Wu Guanzhong forHK$18.6m ($2.4m) andHK$26.4m at a Hong Kong auc-tion held by Sotheby’s in Octoberlast year. She quickly sold theworks to a new owner, who thenlisted them on the Taishan art ex-change at prices 30% higher thanthose originally paid at auction,the reports say. The Chinese gov-ernment recently closed downdozens of these exchanges amidfears that they were growing toofast, and it is not clear whetherthey will reopen.
Smoke and mirrors
A wide array of institutions offersart-related investment products,including mainstream banks,
Chinese antiques market begins to coolBEIJING. The Chinese market for antiques is showing signs of slow-down. Total sales for the first five months of the year generatedRmb4.7bn ($738m)—60% less revenue than last year, according to theChinese Association of Auctioneers. Poly, the leading player in China,took a hit. Its spring sale totalled Rmb3bn, half of last year’s figures.China Guardian, in second place, saw sales tumble to Rmb2.1bn fromRmb5.3bn a year ago. There was further evidence of weakening per-formance: at Sotheby’s Fine Chinese Ceramics & Works of Art sale inHong Kong, eight out of 15 top lots failed to sell, while Christie’s inLondon sold only 50% of its lots. ■ L.Y.
Asia
The Tianjin Cultural Artwork Exchange had to stop trading in 2011 due to fears of inflated prices
such as Minsheng BankingCorporation and ChinaMerchants Bank, that promote artfunds (as does Beijing Poly ArtInvestment Management, part ofthe auction house conglomerate).But many of China’s art-investment vehicles are operatedby lightly regulated trust compa-nies—financial institutionsunique to China that combine el-ements of private equity, assetmanagement and banking. In thepast year, 18 domestic trust com-panies rolled out 45 art-trust prod-ucts—more than four times thenumber launched in 2010.According to Ivan Shi, some ofthese are actually a form of loan:companies that have struggled toobtain bank loans will buy art touse as collateral. This is thenpackaged as an art-trust productto be sold on to rich investors withcash to spare. “It’s an easy way toget loans,” Shi says. He adds that the industry regulator, theChina Banking RegulatoryCommission, has, so far, not paidmuch attention to art-relatedproducts issued by trusts. Aclamp down cannot be ruled out,however, and if this were the case,
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China could easily experience thekind of boom and bust situationthat unfolded in India between2005 and 2008 when regulatorsshut unregistered art funds.
Of course, there are a growingnumber of wealthy Chinese whoare not buying art purely forspeculation. But it would be un-wise to ignore the role that art-investment vehicles have playedin the rise of China’s art marketand their potential to turbochargeany correction. ■Katie Hunt
HONG KONG. The mood in HongKong is clearly sobering after al-most a decade of dizzying pricesat auction. The party is not overyet—star items continue to at-tract record sums—but recenttransactions have been temperedwith caution as buyers increas-ingly focus on rarity and quality.
Sotheby’s opened the seasonin Hong Kong in April andChristie’s closed it in May, withevents held in between by re-gional auctioneers includingTaiwan’s Ravenel, Indonesia’sLarasati, South Korea’s SeoulAuction and new entrants such asDenmark’s Bruun Rasmussen.
Chinese antiques
Bonhams held a modest-sizedauction and recorded its highestever results of HK$250m($32m)—50% up on the same pe-riod in 2011. The figures werebuoyed by the HK$42m ($5m)
sale of 168 snuff bottles from theBloch collection on 27 May (be-low, Qianlong “European Ladieswith Children” snuff bottle).
The provenance contributedto the success of the sale, inwhich all of the lots found buy-ers and a number of pieces wentwell over the high estimate. A6cm-high jadeite bottle, datingfrom between 1780 and 1880 (estHK$800,000-HK$900,000,$102,564-$115,385), went forHK$1.5m ($187,000). The salewas the latest instalment fromthe Bloch family, who havebeen dispersing parts of their collection over the pastfive seasons.
Contemporary
Although 1990sworks by Chinese con-temporary art stars hada decent performance,
newer pieces—which tend to bebought and sold mainly byEuropeans and Ameri cans—havesuffered. At Christie’s HongKong sale on 27 May, Tire, a 2005sculpture by the mainland art starZhang Huan (est HK$600,000-$800,000, $76,923-$102,564),had no reserve but found no tak-ers. With no bids, the auctioneerdropped the price to HK$50,000,but to no avail.
20th-century paintings
The market for modern worksfrom the 1950s and 1960s re-mains one of the strongest inAsia. While much attention hasbeen on Chinese works, a paral-lel development with a differentcollector base is in SoutheastAsia. At the regional specialistLarasati, operating under theUnited Asian Auctioneers um-brella, a very rare mural byBotong Francisco, Nose Flute,1955, estimate on request, soldfor HK$5m ($641,000), a newrecord for the artist.
One of the most covetednames is Affandi ofIndonesia. At Christie’s on26 May, At the Cockfight,1964, estimated at betweenHK$1.2m and HK$1.6m
($155,348-$207,130), set anew record for the artist at
HK$5.54m ($717,000).Emphasising the strength of themarket in modern Chinese paint-ings, the top lot of Christie’s 26May evening sale was BlueChrysanthemums in a GlassVase, 1940-49, by Sanyu. Paintedon board, which is typical of hiswork, the piece sold forHK$47.7m ($6.1m), against apre-sale estimate of HK$23m toHK$28m ($2.9m-$3.6m). ■Alexandra Seno
Please note: all auction resultsinclude the buyer’s premium, whereaspre-sale estimates do not. Forexample, for US sales, Sotheby’s andChristie’s charge buyers 25% of thefinal bid price for lots up to $50,000(£25,000 in the UK), 20% for lotsbetween $50,000 and $1m (UK:£25,000-£500,000) and 12% of theexcess above $1m (UK: £500,000).
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HONG KONG. Total revenues forChristie’s spring sales cameto HK$2.7bn ($352m)—downon 2011, when the auctionhouse recorded an all-timehigh of HK$4bn ($501m),68% more than in 2010.There were notable successesfor Chinese art and antiques,typically the strongest sectorof the market. Traditionalpaintings realised HK$782m($100.8m), one of the bestresults in the category in theauction house’s history. TheFine Chinese ClassicalPaintings & Calligraphy saleon 28 May made HK$205m($26m), making it the mostvaluable auction in the historyof the category at Christie’s.Two sales on 29 May—FineChinese Modern Paintings andGrandiose and Mysterious:Magnificent Paintings by CuiRuzhou—achieved HK$577m($74m), with an overall soldrate of 91% by lot and 93% byvalue. Such bright momentshelped to ease anxieties;although the current size ofthe art economy in Hong Kongunderscores the city’s statusas a place to conductauctions, the final figures area reminder of uncertain timesin the world economy and thecooling of a Chinese frenzy forart and antiques. ■ A.So.
Qi Baishi’s $65m Eagle Standingon Pine Tree, Four-CharacterCouplet in Seal Script, 1964
Record: Affandi’s Cockfight
Christie’snumbersdrop fromall-time high
Whether they willbe able to sell theirart at a higher pricein two or three yearsis a very big risk
“”
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