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 Any
surprise here? Don't think so...Chinese are so predictable
around the world. That's what makes our market unique.
- Hello! TAI TAI Rich
Asians using art as social leverage
Record
prices at Christie's auction in HK paint telling picture
Record prices achieved this week at
Christie's Hong Kong autumn sale paint a telling picture of the explosive
growth of the world's wealthy - and in particular, rich Asians who are using
art and architecture to achieve greater social acceptance.
'The prices paid are crazy, but you know
some of these are given as gifts and it's done to establish the price of the
work so the person getting it knows,' says a Singapore collector.
As Karl Schweizer, head of art banking,
gold and numismatics at Swiss-UBS Global Wealth Management, puts it: 'The
wealthy use art and architecture to leverage their social acceptance.'
Private bankers prowl auctions with their
very rich clients, giving advice and sometimes providing funding for
purchases. And they bid for clients who don't want to be known or are too
busy to attend the sales.
'We represent clients at auctions. We
work carefully with clients to be professional in the art market,' says Mr
Schweizer.
The managing director of Citigroup
Private Bank's art advisory service, Mary Hoeveler, explains: 'When clients
ask us to assist with buying or selling, we do all the homework for them, to
help them understand current market conditions, factors of timing and
location, conditions and provenance issues, and what the real comparables
are for any given work.
'We give them a context for their
transactions - the information they need to make informed decisions. Of
course, a major component of what we do is finding works for our clients,
through dealers, auctions houses and private collectors around the
world.'
Negotiating the heady atmosphere of an
auction - especially when bidding is hot - is intimidating enough. And more
so with the art world populated with sham artists and dubious dealers out to
con the rich.
'We provide confidential, objective
advice to assist clients in identifying quality and value,' says Ms Hoeveler.
'And as part of a regulated financial
institution, we perform in a fiduciary capacity.
We have no vested interest in the sale of
any particular art or artist, and work solely in the interest of our
clients.'
Mr Schweizer, a lawyer by training, says
that 'at the beginning, when I analysed the art market, I felt there could
be improvements that can be made to the standards and structures of the
market'.
One recent trend noticed at auctions is
that very wealthy Chinese are buying fine Chinese artworks back from the
West as part of their heightened cultural awareness, he says. Another is
that more and more Asians are attending auctions to bid for works from 'hot'
periods, identified as modern/classic such as Monet, and post-War such as
Andy Warhol.
A few weeks ago at a Christie's auction
in New York, Hong Kong real estate tycoon Joseph Lau paid the highest amount
ever for a work by pop art icon Warhol, buying a portrait of Mao Zedong for
US$17.4 million. The iconic image of the former Chinese leader is considered
one of Warhol's most sensational pieces of the 1970s.
At this week's Hong Kong auction,
Christie's said that it offered US$1.1 billion of Asian art, watches and
jewellery - believed to be the biggest collection of Asian lots ever
assembled - to cater to the ever-increasing number of Asian rich looking for
collectibles.
In the first six months of 2006, public
auction sales of items worth at least US$1 million reached 454 - about
double the number in the whole of 2005.
UBS estimates that if private sales are
included, turnover could be more than 10 billion (S$30.5 billion).
Ms Hoeveler says that Citibank recognised
some time ago that art prices had reached the point where clients are
listing collections on their balance sheets. 'Citibank decided not only to
recognise those assets and to allow collectors to leverage them, but also
hired a team of experts who could assist clients with all of their art-
related needs,' she says. Citibank Private Bank established its art advisory
service in 1979.
Another important reason for private
bankers to be at auctions is that they provide the money. 'We recognise art
as an asset class, and we allow collectors to leverage that asset,' says Ms
Hoeveler. 'To mediate the risk, the art must be of very high quality and of
international market appeal. We have a rigorous loan review process and the
client must have significant assets in addition to their artwork to
qualify.'
But one complaint heard at auctions of
Asian artwork is that bankers are reluctant to lend because the artists are
not established in the international market, and benchmark valuations are
harder to obtain.
'At UBS, current lending policy is not to
lend against art,' Mr Schweizer says. 'If clients need facilities, we look
often at the full picture of clients' assets and holdings.'
- by Siow Li Sen SINGAPORE BUSINESS TIMES
2 Dec3mber 2006
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