China Returns To Collectibles Investment

After a poor showing in 2012, China has been seen to be losing its luster for many investors. The country’s mighty economy appears to be reflecting the woes …

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After a poor showing in 2012, China has been seen to be losing its luster for many investors.

The country’s mighty economy appears to be reflecting the woes of the rest of the world, and is now slowing down. As a result, confidence when it comes to investing in the country is wavering.

Yet China’s auction market is back on the rise, following major market correction in 2012. While other investments may be ailing, collectibles are once again proving their portfolio potential.

The figures to support this claim come from China Guardian, the country’s leading auction house, which specializes in fine art, coins, stamp and manuscripts.

 The company saw a 23.6% rise in value during its spring 2013 auctions compared with the same period in 2012. This is close to the levels of 2010, but is far from 2011’s dizzying heights, in which China gained the title of the world’s most valuable art market.

That title has since been retaken by the US, but China won’t be happy to part with it for long.

Chinese dragon set to reclaim its title

We’ve already seen that 64% of the country’s high net worth individuals (HNWIs) are in the process of forming a collection, and once those come to fruition, the Chinese dragon will once again take the market by storm.

The figures seen at China Guardian are hoped to provide a boost to the rest of China’s auction business, with Ji Tao, the general manager of Tenwin International Auction, telling China Economic Net that the strong posting could reflect on the entire mainland’s auction scene.

Question is, will you be on board to share in the profits?

The number of millionaires in China is continuing to grow, with a 3% increase posted in The GroupM Knowledge-Hurun Wealth Report 2013.

A global benefit

Another interesting development from the Hurun Report suggests that a return to form isn’t just good news for China and its auction industry, but for the whole world.

The survey shows that the wealthy population are keen to go abroad, with 3% of all spending allocated to travel, especially in desirable locations.

This means that the culture capitals of the world, many of which are already established as hubs for collectors, will be blessed with the cash of China’s super-rich.

Like Russian investors, who we learnt have been put-off by Putin, Chinese millionaires are deterred from spending in their own country by heavy restrictions and tax laws – for example, current laws ban the importation of classic cars, a market with Chinese investors are very keen to join.

Both Christie’s and Sotheby’s noted a growth in bidders from Asia in the first half of 2013, with a 15% rise seen by Christie’s ahead of its inaugural auctions in Shanghai in September. The market leader will become the first international auction house to operate independently in mainland China.

"This development makes Christie’s the first international auction house able to directly conduct auctions in China under its own brand, and will offer collectors a more direct access to our global network and expertise," commented Steve P Murphy, Christie’s chief executive officer.

So, how do we capitalize on this Chinese boom?

Potential over popularity

The main danger with attempting to cash in on Chinese collectors’ enthusiasm is the popularity over potential trap.

Many of this new influx of investors are inexperienced in the collectibles world, and the items that are most popular in the country do not always results in the greatest gains, despite an eagerness to invest.

For example, luxury watches are ranked as the second most popular asset class according to the Hurun Report, yet the category is one of comparatively low increases, realizing a 75% gain over a ten-year period to 2012.

The key is to invest those items that buyer’s are actively seeking, yet are hard to find.

You may choose to look towards Chinese ceramics or Buddhist art, which is seeing strong results at auction at the moment.

However, apart from the occasional find, these are rarely undervalued and extremely difficult to find at a price that isn’t designed with China’s super-rich in mind.

A third of the world’s stamp collectors are Chinese, and they are particularly interested in their collections’ investment potential, according to Stanley Gibbons’ Mike Hall.

"I can confirm that the returns have been over 10 percent per annum on a compound basis over the past 50 years," he added, in a recent interview with channelonline.tv.

And there you have it. Few stocks can match collectibles in terms of gains, and few collectibles can match the rare stamp market as terms of popularity among Chinese collectors.

There’s a reason that the tiny squares are referred to as the “Royal Currency”.

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