singapores hottest startups 2015
Hendra Gunawans Pandawa Dadu (The Dice Game from the Mahabharata Epic)
The changing taste of Asian art collectors
bodes well for the Western art market
Art is increasingly seen as a sound investment by collectors, and holding artworks gives
pleasure to many, but significant risks are lurking in this volatile market.
L
ast November, Vincent Van Goghs 1890 still life,
Vase with Daisies and Poppies, sold for a stagger-
ing $61.76 million at Sothebys New York the
highest auction price for a painting by the Dutch master
in more than 15 years. The buyer was Chinese movie
mogul Wang Zhongjun, chairman of Huayi Brothers
Media Corp, a well-known collector who has turned his
attention of late to Impressionist masters and already
counts in his collection pieces by Pierre-Auguste Renoir
and Camille Pissarro. He has not been the only Chinese
billionaire flexing his muscles in the western art market.
In 2013, tycoon Wang Jianlins Wanda Group bought the
1950 Pablo Picasso painting Claude and Paloma for $28
million, more than double the pre-sale upper estimate of
$12 million.
In the last five years, weve seen a dramatic change
in what collectors from Asia are looking to buy, says
Suzanne Gyorgy, global head of Art Advisory & Finance,
Citi Private Bank. Five years ago there was not much
interest in western art, and that has changed. We go
to auctions, bidding on behalf of our clients there and
watching the room, and its undeniable that specialists
representing Asian clients are very active in those sales of
western art.
We also have clients from China going to New York,
28 SINGAPORE BUSINESS REVIEW | JULY 2015
The combined where we organize for them tours of galleries, auction
value of the previews and museums. They are getting exposed to
collections of the best, and their interest is really genuine and really
the top 10 art growing. I would say the knowledge and education of the
collectors from Asian clientele [in western art] has grown in leaps and
China and bounds, Gyorgy adds.
Hong Kong is
worth about The rise of rich art collectors in Asia
$2.57 billion, Asia currently has an estimated 492 billionaires, with
often a fraction 184 living on the Chinese mainland, another 53 in
of their net Hong Kong, and 24 living in Singapore, according to the
asset value. Knight Frank Wealth Report 2015, and art as an invest-
ment of passion remains firmly on their radar. A separate
report by Wealth-X, released in March during Art Basel
in Hong Kong, estimated that the combined value of the
collections of the top 10 art collectors from China and
Hong Kong is worth about $2.57 billion, often a fraction
of their net asset value.
For example topping their collectors list was Wanda
founder Wang Jianlin, with assets worth an estimated
$27.5 4 billion and an art collection worth an estimated
$1.2 billion, while Shanghai Zendai Investment Group
founder Dai Zhikangs assets are estimated at $1.3 billion
while his art collection is worth $80 million.
Magnus Resch, the founder of Larrys List, an art mar-
 singapores hottest startups
ASIAN
ket knowledge company, estimates that 18% of the global
collector scene is now based in Asia, with more than one
third of it in China. Beijing is the largest collector city in
Asia with a share of 14% of Asian collectors. Seoul comes
second (12%) and Singapore third (7%), he says, noting
that 45% of the collections were founded between 2001
and 2010, and 5% in the three years since 2010.
According to the TEFAF Art Market Report 2015,
released in March, the global art market raked in over
51 billion ($53.9 billion) last year a 7% year-on-year
increase that finally took the annual sales figure above
the 2007 pre-recession high of 48 billion with three
major art markets dominating activity: the US (39%),
China (22%) and the UK (22%).
The author of the report, Clare McAndrew, noted
the art market last year reached its highest ever level of
sales with continuing strength in Modern and Post War
and Contemporary art, but it continued to be a highly
polarized market, with a relatively small number of
artists, buyers and sellers accounting for a large share of
value, though she also noted that,a promising trend
counteracting this to some extent is the growth in online
sales, which has encouraged a greater volume of sales in
lower-priced segments.
International rivals have picked up some market
share from Chinese mainland auction houses when
Auction scene of the sales top lot Plum Blossoms by Wu Guanzhong
Kevin Ching, CEO of Sothebys Asia and Mr. Wang Zhongjun at the
presentation ceremony of Van Goghs Still Life, Vase with Daisies and Poppies
2015
ART REPORT
Chinas art they entered the market. According to UK based art
fund and art market research company ArtTactic, over the last two
investment years, Poly Auction and China Guardians market share
trust market fell from 53.7% in 2012 to 47.8% of the market in 2014.
slowed rapidly Yet Sothebys and Christies are still struggling to get a
from an foothold in the Chinese mainland market, having failed
estimated $529 to create any significant inroads into this market, it noted
million in 2012 in a recent report.
to an estimated Sothebys sale in autumn 2014 was 46% lower than its
$169 million spring 2014 sale and 68% lower than autumn 2013, while
raised in 2013. Christies autumn sale in Beijing was 14% lower than
autumn 2013.
ArtTactic founder Anders Petterson says, Although
were seeing more Chinese collectors buying western art,
I dont see this as the reason for the market slowdown
[in China]. Instead, Petterson believes slower eco-
nomic growth, government anti-corruption measures
and tighter regulations around the art investment trust
market in China are the main reasons behind a dampen-
ing of the market.
This is confirmed by data from the Art & Finance
Report 2014, prepared by Deloitte Luxembourg and
ArtTactic, which showed that Chinas art fund and art
investment trust market slowed rapidly from an esti-
mated $529 million in 2012 to an estimated $169 million
raised in 2013 (latest available figure), following stricter
government regulations on the Chinese shadow-banking
market.
The report pointed out that 76% of art collectors
around the world are buying art for collecting purposes,
but with an investment view (up from 53% in 2012),
implying that the investment aspect of art buying is
something that collectors are increasingly concerned
about.
Drivers of the strong interest in art
For Mohit Mehrotra, Deloittes Global Wealth Manage-
ment Group leader, a couple of important developments
are driving the strong current interest in art. The first
generation of wealth was really about creation and ac-
cumulation, the second generation is starting to react
like their peers in the west, appreciating the finer things
in life, he says.
But Mehrotra also notes that arts and collectibles
as part of ones asset would allow a High Net Worth
Individual to diversify his/her risks from being overly
concentrated in capital market products. Art, he says,
also gives investors a different way of managing their
portfolio out of keeping it all in liquid financial assets.
Petterson notes that, while investment is a strong
motivation among Asian art buyers, it is by no means a
trend exclusive to the region, but one that has evolved
globally over the last 10 years.
Gyorgy also points out, For better or for worse, in the
last five years, there has been a general financialization
of the art market. The private bank offers clients advice
on how to build an art collection that will stand the test
of time, and she says art advisory has been a growing
business for the bank around the world. But shes also
quick to add that, were really not advising clients to
SINGAPORE BUSINESS REVIEW | JULY 2015 29
 singapores
ASIAN hottest startups 2015
ART REPORT

buy art as an investment. Were all museum-trained and 65% of experts has further upside potential. So far, no one expects an
when were talking to clients were really advising them surveyed art market correction within the first half of 2015, which
about how to build an important collection, so its the art believe might come as a relief.
for art. contemporary Although weaker economic growth might lead to
Petterson notes that an investment in art should be a art market slower art sales in the mid- to lower-price segments, the
long-term endeavour, otherwise you are susceptible to sales will ultra-wealthy are expected to continue their trophy hunt-
being caught up in the fads and short-term cycles of the level out this ing at the top end of the market, Petterson says. This
markets. Unless you can afford to take at least a 10-year year, though is supported by the fact that 73% of experts are positive
view on the market, you should probably stay away from 35% feel the towards the $1 million+ segment. However, the higher
art as an investment. Art for pleasure and enjoyment is a market has end of the middle-market could rekindle, as buyers are
different thing. further upside picking lower-hanging fruits in the hope that these art-
Patricia Amberg, head of the UBS Art Competence potential. ists will be promoted to the millionaire league. Expect
Centre, points out that the art market remains hetero- another year with new auction records, he says.
geneous and about which very little data are available. By Sonia Kolesnikov-Jessop
Only the hammer prices achieved at auction are public.
This excludes the larger part of the art trade: galleries,
dealers, private treaty sales, online platforms and all the
rest. Auction prices therefore only represent about a
third of the art market at best, making it one of the most
non-transparent markets.
She adds, We always recommend that clients collect
art for the love for art itself.
The Mei Moses World All Art Index, which is widely
considered a key index, showed a compound annual
return of 7% between 2003 and 2013, slightly below the
S&P 500s total return of 7.4%. But post-war and con-
temporary art, as well as traditional Chinese works of art,
delivered compound annual returns of 10.5% and 14.9%
respectively.
Over the last 40 years (1973-2013), the compound
annual return (CAR) for the World All Art Index was
6.9%, below the S&Ps 10.9%. The S&P and post-war and
contemporary art have very similar results, with a CAR
of 10.9% and 10.8% respectively.

Outlook for the art market in 2015

According to the 2015 outlook report by ArtTactic, 65%
Georgette Chens Self-Portrait
of experts surveyed believe contemporary art market Est. HK$500,000 700,000 / US$64,500 90,500
sales will level out this year, though 35% feel the market

Liu Dans Splendour of Heaven and Earth

Est. HK$10 15 million / US$1.29 1.94 million

30 SINGAPORE BUSINESS REVIEW | JULY 2015