Pop goes bubble for Chinese Indian artists – Businessweek

SOTHEBYS HONG KONG AUTUMN AUCTIONS

While much of Hong Kong hunkered down just hours before the arrival of a typhoon on Oct. 4, the start of Sotheby’s three-day auction of modern and contemporary Asian art was buffeted by the financial storm on Wall Street. Of the 47 works that went under the hammer, more than 40% were unsold. What’s more, earnings for Sotheby’s (BID), including the auctioneer’s commission known as the “buyer’s premium,” were a paltry $15 million, accounting for just 41% of the auction house’s estimated takings for the night. Among the biggest upsets was the unsold work by India’s hot-selling artist Subodh Gupta, Untitled, which had an estimated price of $1.55 million to $2.05 million. Another big surprise: Chinese cynical realist painter Liu Wei’s triptych, The Revolutionary Family Series, failed to find a bidder willing to meet the $1.55 million suggested minimum.

As the weather deteriorated on Sunday morning, so did events in the auction hall. Only 39 out of 110 paintings from the 20th Century Chinese Art Sale found buyers, while 71 had to be packed up and shipped back to their sellers. By the afternoon session, the usual buzz at Hong Kong’s contemporary Chinese art auctions was sorely absent. At one point during the sale, the auctioneer mistook a woman covering her mouth to stifle a yawn for her wishing to bid, prompting a valiant attempt to inject some levity into the proceedings as he asked if “anyone else is yawning in the room.”

Yawns gave way to disbelief a little later when two works by white-hot Chinese artist Zhang Xiaogang went unsold. That’s a huge reversal for the Beijing-based artist, whose paintings have routinely fetched millions of dollars, well in excess of auction estimates. (His painting Bloodline: Big Family No. 1 was one of the few top lots that sold on Saturday, though the $2.97 million price was below the expected maximum.) Yue Minjun and Zeng Fanzhi, two others among the hottest-selling Chinese contemporary artists, did manage to sell, although well within the estimates.

Wall Street Fallout
You connect the dots: Wall Street goes into meltdown, and Sotheby’s auction bombs in Hong Kong. Kevin Ching, Sotheby’s CEO for Asia, tries to be optimistic about whether the two are connected. “I hope there is no immediate direct correlation between the financial market and the art market,” he says, pointing to the widely successful auction of enfant terrible Damien Hirst’s works in London within days of the collapse of Lehman Brothers. The problem with some of the Hong Kong auction, he adds, stems from overly ambitious owners trying for unreasonably high prices. “When we have [sellers] who want aggressive estimates over and above what [the] market can accept, they would have to occasionally accept the consequences, and I think that’s what happened here [Saturday] night,” Ching explains.

Still, others in Asia’s art business are certain the fallout from Wall Street is already hurting Chinese and Indian markets. In both countries, newly wealthy investment bankers and hedge fund managers helped inflate bubbles in works by local artists. For instance, in the last four years a booming Indian economy and buoyant stock market encouraged many private banks to offer fee-based services to assist clients in building portfolios of artworks sourced from galleries, auctions, and even direct sales. Fund managers say that investment bankers with their hefty bonuses helped inflate art prices by 30% to 60% above their real value, according to a gallery owner in Mumbai.

Bright Spots
Now with Wall Street in turmoil, most of the bankers who were regulars at art shows and auctions have moved out, says avid art collector Harsh Goenka, chairman of India’s diversified RPG Enterprises, which has interests in tires, power, and retail. He claims that in the last few years, around 60% to 70% of art sold in auctions and shows in India went to the new breed of investor rather than art connoisseurs. “They looked at art as a brand and made money by trading in it,” says Goenka. In the past few months, he says, painters and art dealers have been calling him up to offer their unsold works at a 30% to 40% discount.

The picture isn’t all grim, though. The mood was positively ebullient at Sotheby’s Hong Kong on Oct. 6 as buyers crammed the room for the auction of Southeast Asian contemporary paintings. Sotheby’s employees manned the phones to handle enthusiastic overseas bidding. For instance, Indonesian painter I Nyoman Masriadi had already set a personal record on the first day of the Sotheby’s auction when his huge canvas featuring Batman and Superman sitting on adjacent toilets sold for $620,000. He then surpassed that with a painting of boxers that seems part Botero, part Léger; it fetched a high $833,000. A bit later, during furious bidding for yet another Masriadi, the auctioneer exclaimed “This is really, really fun.” The room broke into applause when the work finally sold for a very respectable $307,000.

The reason for this sea change in sentiment? The prices were far more affordable than the works from China and India on sale during the weekend, and collectors seem to have finally cottoned onto the notion that Indonesian, Vietnamese, and Filipino artists represent opportunities for collectors to own great art. One work by up-and-coming Filipino painter Geraldine Javier sold for $32,000, more than three times the high estimate. An intimate portrait of a woman and child by Vietnamese painter Mai Trung Thu also sold for triple the estimate, fetching $23,000.

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Chinese, Indian leading artists fail to sell at Sotheby’s Asian Art evening sale October 2008

Kang Hyung-Koo

 

 

 

REPORT FROM THE AUCTION ROOM

Big name Chinese and Indian artists and several premium lot artworks failed to sell at Sotheby’s October 2008 evening sale of contemporary and modern Asian art but the sale pointed to a new trend of enthusiastic collecting interest in South East Asian art.

Sotheby’s presented its first evening sale of Asian art in Hong Kong 4 October 2008 following Christie’s lead in the Spring auctions. Although Sotheby’s was more aggressive in the number of lots offered (Sotheby’s 47, Christie’s 32), Sotheby’s sale was generally a more diverse cautious offering compared with Christie’s. Sotheby’s presented:

• artworks covering more time periods (Sotheby’s contemporary and modern, Christie’s contemporary only)
• artworks from more geographical markets ( Both: Chinese, Indian, Korean, Japanese, Sotheby’s added Filipino and Indonesian)
• a greater price range at Sothebys with given estimates ranging from US$13,000 to more than US$3.85 million (Christie’s lowest given estimate was US$64,100 and ranged up to US$3.2m).

The results however could not have been more different. While Christie’s sale was a resounding success Sotheby’s sold only 28 of the 47 lots on offer.

The auction room was packed with all of the 200 or so seats taken and though more seats were brought in 30-40 people had to remain standing at the back. There were two rows of Sothebys staff (30-40 people) taking telephone bids. The auction room hummed with anticipation and got off to a roaring start with the first two lots. Filipino artist Ronald Ventura’s ‘Pinamumugaran’ attracted furious bidding and achieved a price of US$230,000 ex premium compared with estimates in the range US$13,000 to US$23,000. The next lot Indonesian artist Handiwirman Saputra’s ‘Mental Series No 8’ estimated at US$25,000- US$40,000 was also successful and eventually sold for US$140,000 ex premium.

Enthusiasm quickly waned during the next two lots of Indian art: lot 3 by  Thukral and Tagra just exceeded the estimate and lot 4 by Jagannath Panda missed its estimate.

The first big upset was lot 5 Subodh Gupta’s ‘Untitled’ estimated at US$1.5 – 2million. Known as the leading Indian contemporary artist Gupta was the first Indian contemporary artist to be included in international auction sales. Sotheby’s had high hopes for this lot but it failed to meet the reserve and went unsold. This set the tone for the next 7 lots; although the works were by  big name Indian and Chinese contemporary artists only 2 (Zhang Xiaogang and Feng Zhengjie) sold just scraping the bottom end of the estimates.

I Nyoman Masriadi

The remainder of the sale was slow and bidding was sticky apart from a couple of bright spots. Indonesian artist I Nyoman Masriadi’s ‘Sorry Hero, Saya Lupa’ estimated at US$48 – 75,000 attracted wide bidding from the room and phones and was finally sold for over US$500,000. Other artists who attracted several bidders and sold above estimates included Korean artists Lee Bul and Kang Hyung-Koo and Indonesian artists Agus Suwage and Affandi.

Contemporary Chinese artists who failed to sell any works in the sale included Liu Wei, Wang Guangyi, Tang Zhigang, Zeng Fanzhi, Yan Pei-ming, Feng Lijun. Chinese Moderns were not spared and lots by Liao Jichun, Chang Yu, Zhu Dequn were not sold. Other Asian artists who were not successful included Indians Subodh Gupta, Justin Ponmany, Japanese artist Takashi Murakami and founder of new media art Nam June Paik.

Some commentators suggest that this sale has been less successful because it coincides with a structural turning point in buyers’ tastes which are speculative and fad-led by nature and that interest in Chinese contemporary art has been replaced with a new enthusiasm for Korean and South East Asian art.

Fads aside, the correlation between prices of works and demand is certainly striking demonstrating a new price sensitivity by buyers of Asian art. September’s financial meltdown is no doubt the leading cause of the many failures in this sale but other factors may also be involved. The number of auctions and fairs has exploded in the last two years providing excess supply of art just when demand is reducing. This Sotheby’s auction competes with the concurrent Hong Kong International Art and Antiques Fair in which art is shown by over 80 galleries in 5000 sq metres of space on the floor above Sotheby’s sale at the Hong Kong Convention and Exhibition Centre. The Sotheby’s sale also overlaps with Korea’s leading auction house Seoul Auction’s first auction in Hong Kong which is offering high quality Korean Japanese Chinese and Western modern and contemporary works.

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Mei Moses art index founder talks about financial crisis and art – Artnet

FINANCIAL CRISIS IMPACT ART

Michael Moses, a finance professor at New York University’s Stern School of Business, may well be the art-world’s most famous academic expert on art prices. With his colleague Jianping Mei, Moses co-developed the Mei Moses Index, a fine-art price index that widely made news for showing that artworks sold at auction over the past 50 years had a compound annual growth rate better than that of bonds and close to that of the Standard & Poor 500 index. With U.S. financial markets facing the biggest crisis since the Great Depression, Artnet Magazine Germany contacted Moses for a telephone interview on the role that art investments might play in the ongoing fiscal-market drama.

Artnet Magazine: The finance world has not experienced such turbulence for decades. Will there be repercussions for the art market?

Michael Moses: Historically speaking, the art market has tended to lag downturns in the financial market by 6-18 months. But the art market is also dependent upon worldwide wealth creation. So a downturn in a single market may not affect the art market, but a downturn in world markets will most likely affect the art market. But it’s driven more by global accumulated wealth than by short incremental changes.

AM: Could art become a substitute investment? In times like these, do investors move their funds not only to gold, but if necessary also to artworks?

MM: When individuals sell equities, they need to put the proceeds somewhere, whether it’s gold, cash or art. Historically, art has been basically an asset class, and money flows to it during good times and bad times. The question is how much is flowing. And when people are disposing of other assets, there may be an opportunity for some of those assets to flow into the art market.

AM: Can the loss of capital on the financial markets lead to “emergency selling” in private art collections?

MM: Yes. We’ve seen it before when the dotcom bubble burst. There were executives who had to sell works that they had just recently bought during the glory days, and that’s true with any asset. [Editor’s note: It has just been reported that Richard Fuld, chairman of the now-bankrupt Lehman Brothers banking firm, has consigned $20 million in art to Christie’s auction house.]

AM: Is the gallery market invisibly linked to the finance market? Will New York lose influence as a marketplace?

MM: Again, this is a question of ups and downs. It would stand to reason that, due to changes in Wall Street and changes in some American companies, the people who were long in all of these markets will stand to lose money. The people who were short in all of these markets will tend to make money. On balance, most likely in the short run, there probably will be more losers than winners. But in the long run, there’s nothing that I see that shows that things won’t rebound over time — they always have in the past. But I don’t have a crystal ball.

AM: The market has many different sectors, like contemporary art, or classic modernism, or 20th-century design. Will this financial crisis effect sub-sectors of the art market differently?

MM: Currently I think that we’re finding that new money seems to go after new art, and this tendency might be one of the reasons that post-war art has done so well over the last five years, so potentially, this category might be more susceptible to downturns in new wealth creation. But we have to remember that wealth creation is a worldwide phenomenon now more than it has been in the past, so it may be that the world market picks up now where the American or European markets may slow down.

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Global downturn will not affect art market says Hoffman, The Fine Art Fund – Business Standard

MARKET WATCH The art market will not be affected by the vicissitudes of the global economy Philip Hoffmann chief executive of The Fine Art Fund said to the Business Standard at the August 2008 Indian Art Summit. “The trading in art only looks to the economy of the super-rich,” he cites the example of Russian billionaire Abramovich spending close to $100 million just this year to pick up a few Freuds and Bacons (at record-breaking prices) to furnish his new house. “The total art market is worth around $30-50 billion, of which only about $15-20 billion is investible. And of this, only 20 individuals account for $2-4 billion worth of art.”

Nevertheless, Hoffman feels, that art investment is best left to the super rich. “Our minimum investor typically puts in around a quarter of a million dollars; and our typical investor is usually one who’s put in a million to five million dollars. I don’t advise anyone with modest wealth to invest in art. Unless he’s putting in less than 5 per cent of his money into art, he shouldn’t do it.”

Hoffman does annual trade of $120-130 million every year through the five funds he manages.  Fine Art Fund I – the first of these that he announced in 2003 to invest in museum quality art – is the longest-running and most successful art fund globally, having announced last year an average annualised returns on assets sold of 44 per cent. 

Hoffman claims that he never buys any art for himself though. “I trained as a chartered accountant. I was working with KPMG [in their audit practice] when I was recommended as finance director of Christie’s. I had no interest in the arts whatsoever.” He went on to become deputy managing director of the auction house’s European business and later, managing the old masters’ division. At 33, he was member of Christie’s International Managing Board, the youngest ever.

So what makes the art world go round? What is it that determines whether a painting will sell for $1,000 or for $1 million? “It’s simple economics – rarity and some amount of marketing, even if it happened hundreds of years ago. Take Canaletto. He was commissioned by the Queen to paint important British monuments. The queen herself had 20 or so of them and the rich men decided that if the queen had something they wanted it as well, and so on. It’s the same today, you hang a Gupta on the wall and it’s like hanging bank-notes on the wall or putting your bank statement on the table. I’m worth millions, it says.”

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Fresh evidence contemporary art price rise is structural says FT

 

 

 

 

 

 

Source: Financial Times

MARKET NEW BUYERS MORE BUYERS The huge wealth from oil and mining in the Middle East and Russia is flowing into fine art, with a rush of new buyers entering a market that was already booming. 

The arrival of Russian, Middle Eastern and emerging market collectors has given fresh evidence to those who believe that the powerful rise in the price of artworks is structural rather than cyclical – reflecting a long-term shift to a truly global market supported by growing numbers of millionaires and billionaires.

 

Last high 1990 surpassed in 2007

Last year, the art market – as measured by proceeds for the top 100 artists sold at auction – in nominal terms surpassed the previous high set in 1990, according to data from Art Market Report. After a decade in the doldrums the market recovered sharply in 2003-04 and has been on the upswing ever since. The rise in the contemporary market has been especially strong, with prices up by 300 per cent in the past three years, according to Art Market Report’s Contemporary Art 100 index.

 

Doomsayers wrong so far

Doom sayers have been predicting a fall in art prices for the past two years. The high level of nervousness about the market was revealed last November, when shares in Sotheby’s plummeted 28 per cent in a day. The reason? The auction house had failed to sell a work by Van Gogh at its sale the night before. The share price has not recovered.

Many respected dealers and collectors believe the market has reached its peak. Eli Broad, the Los Angeles-based billionaire collector, has said several times that he does not believe prices will continue to rise.

One bearish New York-based dealer says: “Mark my words, the Russians will turn out to be the Japanese of the early 21st century.” During the last art market peak, Japanese property developers were famously among the biggest buyers, snapping up Impressionist works – they were especially fond of Van Gogh – only to offload them at much lower prices just a few years later when the Tokyo asset bubble burst.

 

Customer base from more countries now

The underlying support for today’s art market does appear to be much more broadly based. 

Sotheby’s points out that five years ago, its buyers who spent more than $500,000 on an artwork came from 26 countries. Today, buyers spending that level or more come from 58 countries. Last year, 21 per cent of buyers at its sales were new, the auction house says. Since few buy at auction only once, that means an influx of customers. Helena Newman, vice-chair of Impressionist and Modern art at Sotheby’s, says: “The whole make-up of buyers has changed beyond recognition from 10 years ago. Now we have a far bigger global reach. We are also seeing far greater demand for the very best works. Our big challenge remains the sourcing of works.”

Simon de Pury, who heads the Phillips de Pury auction house, echoes that trend, saying: “Five years ago, the market was concentrated in western European and American collectors, a small group of art cognoscenti. The Contemporary market was dominated by three countries – the US, the UK and Germany. Now we can see the change just in our website: the hits are coming from Brazil, Turkey, China, India, Indonesia, Korea.”

 

Change accelerated 2 years ago

Mr de Pury says the change accelerated two years ago. He predicts that Contemporary art will continue to grow in buyer popularity, in part because the sheer number of buyers means that demand for works from previous eras cannot be met. “It is a question of availability. If you have unlimited money, you can no longer buy the best Old Masters collection in the world. But you can buy the best collection of living artists. For that reason Contemporary art will be the most significant market for the next 20 years.”

 

New museums adding to demand

He adds: “In China, every new [top-end] real estate complex being built has an art museum. All these spaces need to be filled and that will keep demand high.”

Most Middle Eastern nations are likewise building art museums, with both a Guggenheim and a Louvre destined for Abu Dhabi, for example. These museums will start accumulating works to fill their vast spaces later this year. In the US, the home of most of the world’s billionaires, there is a growing trend for rich art-lovers to build their own museums rather than donate works to existing museums as used to be the practice.

 

More millionaires 

There are far more rich people in the world and they are simply far more likely to buy artworks. The number of millionaires in Brazil, Russia, India and China grew by 19 per cent last year, according to the World Wealth Report, released this week by Merrill Lynch and Capgemini. The top 10 collectors in the world now include Victor Pinchuk, a Ukrainian steel billionaire, Carlos Slim, the Mexican telecommunications tycoon, and Qatar’s Sheik al-Thani, according to ARTnews magazine, which this week released its annual list of big spenders.

Art is also seen as a socially desirable channel for the wealth resulting from the 20-year growth in financial services. US hedge fund managers such as Steve Cohen have emerged as big Contemporary collectors. Ben Crawford, the chief marketing officer of MutualArt.com, says: “It starts with the wealthy and then there is a trickle-down effect. Look at the beginning of the century – who bought designer clothes? Tiny numbers of high-society people – but once they became available to more and more people, the buyers didn’t go back. The art buyers won’t go back to putting Star Wars posters on their walls.”

Image details: Eli Broad, art collector

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