Asian Demand, Proved by Record-Breaking $390 Million Autumn Sales, Pushes Up Prices to Pre-Boom Levels

CHINA.- After the record-breaking $390 million autumn sales at Sotheby’s Hong Kong last month and China Guardian’s $620 million record sales last week – the overall Chinese art market is becoming very hot once again.

Whilst other art markets are talking about the recovery, the Chinese art market is experiencing a second boom – strongly supported by regional buyers. Auction prices in certain traditional sectors, such as Chinese painting and calligraphy, as well as antique porcelain and ceramics, have been pushed to new heights, and art market analysts are already questioning the sustainability of this surge in prices.

Evidence of the frenzy was seen in early November 2010, when a bidding war between Asian buyers pushed a Qianlong-dynasty vase to a price of $83.2 million, an auction record for Chinese art. The vase was offered through the west London auction house Bainbridges, with a pre-sale estimate of £800,000 to £1.2 million. It made more than 40 times the high estimate, with a hammer price of £43 million.

The action taking place in the more traditional collecting categories of the Chinese art market, is also rubbing off on the Chinese contemporary art market. Christie’s Asian & Chinese 20th Century Art (Evening Sale) held on 27 November 2010 in Hong Kong, achieved a total of $31,060,900 (excluding premium). This was 8% lower than Christie’s ‘white glove’ sale in spring 2010.

In terms of Chinese contemporary art, Christie’s Hong Kong raised a total of $24,140,220 from both the Asian Contemporary art and the Chinese 20th Century art sale. This was at the top end of the pre-sale estimate of $16,773,250 to $24,438,050. The total was 54.4% higher than spring 2010, and the result supports the strong positive trend set out by Sotheby’s Hong Kong last month. The two houses are competing neck and neck, with Christie’s total for contemporary art only 9.1% higher than the equivalent sale for Sotheby’s. In Christie’s Contemporary Asian Sale, Chinese contemporary art accounted for 89.5% of total value, versus 72.1% for Sotheby’s.

The success of the Christie’s sale was underpinned by broad interest in the mid- to high end price segment. In contrast to the contemporary Chinese sale at Sotheby’s Hong Kong in October, where the top 10 lots accounted for more than 72% of the value – the top 10 contemporary lots in Christie’s Hong Kong sales accounted for only 42% of the total. The average auction price for Contemporary Chinese art increased to $182,880, more than double that of spring 2010.

The price segments that saw the strongest interest was works sold for $100,000 and above, with significant interest in the $100,000 to $500,000 price bracket. This price category saw its share increase from 14% to 18%, or in terms of value from $2.19 million in spring 2010 to $4.35 million in the autumn 2010.

Similar to Sotheby’s Hong Kong sale, the demand for Zheng Fanzhi’s works remain very strong, and 4 out of the top 10 prices were achieved by the artist, accounting for 27% of the overall total. The second highest lot in the sale was by artist Mao Xuhui’s ‘92 Paternalism’ (1992), which sold for $1.3 million against a pre-sale estimate of $390,000 to $650,000. Zhang Xiaogang also had a good run, and despite only having one lot from the ‘Bloodline’ series in the top 10 price list, 6 lots sold for a total of $2.6 million with only one painting failing to find a buyer.

The ArtTactic Auction Indicator for contemporary Chinese art at Christie’s Hong Kong fell 23.5% from spring 2010, and the current Auction Indicator is now standing at 39, down from 51. The reason for the drop in the Indicator is largely a result of a higher unsold rate, which increased from 18% in spring 2010 to 34% in the recent sale. The equivalent Auction Indicator for Sotheby’s was 43 in October 2010.

Among the high profile failures was Cai Guo Qiang’s 32-meter wide “Search for Extraterrestrials” (1997) in Chinese ink, smoke and gunpowder on paper. The work reached HK$30 million ($3.9 million), which was below the reserve price.

The higher bought-ins and drop in the Auction Indicator signal that although the Chinese contemporary art market is experiencing a strong revival – the market remains selective, with strong focus on certain artists.

Compared to the first Chinese contemporary art market boom that started in 2005, the current Chinese contemporary art market is entering a new phase, where the dominant buyers are Asian, rather than Western. This trend is likely to continue, and is likely to widen the valuation gap between many of the Chinese artists that are highly appreciated by Western collectors, such as Ai Weiwei and those that represents a more Asian taste, such as Zheng Fanzhi, Liu Ye and Zhang Xiaogang.

One note of caution – the surge in art prices is likely to attract more and more speculators and short-term investors. If the current rate of growth continues, we could be in the beginning of a second bubble in the Chinese contemporary art market, inflated by strong Asian demand for high-yielding assets.

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