18 August 2019
Auction houses are capitalizing on the growing demand for Chinese art and antiques. Photo: Bloomberg
Auction houses are capitalizing on the growing demand for Chinese art and antiques. Photo: Bloomberg

Art auctions thrive but pitfalls abound

Most of the items that will be put up for sale next month by Poly Culture Group (03636.HK), the Chinese state-owned auction house, will be off-limits to the public.

An archaic bronze vessel from the Western Zhou dynasty carries an estimated value of more than half a million US dollars. An ink painting of horses by Xu Beihong is worth as much as US$1.8 million. And, the Mask Series of expressionistic art from Zeng Fanzhi is nearly double that.

Not only does it take deep pockets to collect the items, one would also need to be familiar with artistic concepts like abstract expressionism, realist movement, or the deep historical story behind, to really appreciate the stuff on offer.

But that won’t stop people from betting on huge prices at the auction, and the consequent benefit to Poly Culture in terms of commission fee. The company made its debut on the Hong Kong bourse earlier this month — not the best of time, given the jitters stemming from the Ukraine crisis and Chinese corporate bond defaults.

But, very much like an auction scene, bidders are still lining up to grab more shares of the company, due to optimism over its auction and other businesses. The counter traded above HK$44 at one point, one third higher than the initial public offering price.

Along with decades of economic growth, art and antique collection has become a fashion among Chinese museum operators, individuals and even companies.

Poly Culture is not the only one looking to capitalize on the market potential.

Top galleries and international auction houses are strengthening their foothold in Hong Kong to tap the demand from a growing list of collectors from China and the region.

Christie’s expanded its gallery last month. Prior to that, White Cube, Edouard e Malingue Gallery and Simon Lee Gallery have all chosen the city’s central business district to boost their local presence.

Christie told Lifestyle Journal that the additional space will allow it to conduct auctions more frequently. Another important function is about educating the customers.

“Lots of people want to start collecting art, but they have no idea how,” a Christie’s official says, adding that from April, there will be monthly lectures.

With the financial world warning of some crisis or the other, auction business seems to be an ideal safe haven.

“Our market recovered quickly after the 2008 financial crisis. Hong Kong has been rather stable; our sales hit HK$7 billion last year, this year is likely to turn out okay,” Christie adds, noting that Asian demand for Western art is on the rise.

Rival Sotheby’s shares the optimism.

“Hong Kong ranks number three in the global auction market. Collectors from mainland China, Indonesia and Taiwan all love to come here,” Sotheby’s executive Angelika Li told the Journal.

Christie’s and Sotheby’s are both very upbeat about Hong Kong’s future as an art auction center. Tax free transaction is one big plus. The city’s sound legal system and stability are other merits. Sotheby’s in particular applauds Hong Kong’s high efficiency. Others name transparency as a key edge.

“On mainland China, usually, the pictures are not hung and ready until one hour before opening,” Li says.

While Asian appetite is on the rise, European museums are on the selling side. “Due to economic downturns, some Western museums, particularly privates ones, are having problems balancing their books. So some of them are taking the initiative to approach auction houses to cash in on some exhibitions,” Li Zhong Hong wrote in the Hong Kong Economic Journal monthly.

In addition to an overall increase in appreciation of art and antiques, some mainland tycoons in particular love to buy antiques from their home towns, Li adds.

Though many analysts are upbeat about the prospects of Poly Culture, some are concerned about the rampant issue of counterfeit works and antiques in China and the relatively high non-settlement of auctioned items.

Sourcing is indeed a big challenge, and distinguishing a true piece from a reproduction is the number one priority to run a successful auction house, Hu Yan Yan, the President of the Hong Kong unit of Beijing-based China Guardian Auctions stressed in an interview with the Hong Kong Economic Journal Monthly.

The Hong Kong office acts as the first goal keeper, Hu said. After preliminary research, and screening, potential sellers approaching the firm are then passed on to Beijing for more vigorous verification.

Apparently, one way of telling whether an item is original is by looking at its previous owners. For example, if the collector happens to be a close friend of the artist, the source will be lot more trustworthy and the item is usually worth more, says Hu.

To stay competitive, an auction house also needs to look for unique pieces around the world to keep its wares fresh and exciting. That is because some customers do not like to buy an item that has frequently changed hands in auctions.

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EJ Insight writer

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