Art Stocks on a Tear

October 20, 2009

Judging by this month’s performance of Skate’s Art Stocks Index (as of Friday, October 16, up 9.6% to 107.4 over September 30), one would hardly guess that the market for fine art still very much favors the buyer at this point – strong performance at recent Hong Kong auctions notwithstanding. In this issue of Skate’s Market Notes, we will focus on three of our art stocks that have performed exceptionally well in October – Sotheby’s, Artprice and Artnet.

Sotheby’s – with a closing price of USD 18.49 on Friday, October 16, Sotheby’s is up just over 7.3% this month and up more than 300% from its 52-week low of USD 6.05 on February 27. Estimates for the major auctions in November and December are still quite a bit lower than they would have been prior to the financial crisis, and there is every reason to believe that buyers will continue to have the upper hand this fall, but strong demand at major Hong Kong auctions earlier this month has certainly buoyed up the stock from the lows of last spring. To put matters in perspective, however, Sotheby’s still needs to more than triple yet again in order to reach its pre-crisis closing high price of USD 57.64, which it achieved just over two years ago on October 10, 2007.

Artprice – closing at EUR 12.06 on Friday, October 16, Artprice has seen a phenomenal increase over its 52-week low of EUR 2.75. This month alone, the stock has seen an amazing increase of just over 82.1% from its September 30 closing price of EUR 6.62, which already represented a 42.8% improvement for the year. Artprice has enjoyed a stellar year thus far and has gone a long way in making up for the heavy damage that was done to its share price in 2007 and especially 2008.

Artnet – closing at EUR 5.88 on Friday, October 16, Artnet is perhaps the biggest surprise given the fact that for much of the year the stock has been on a generally downward trajectory. As of September 30, Artnet’s share price was down 7.5% for the month and 16.9% for the year. And then October came. After closing at EUR 3.99 on September 30 – a price still well above the company’s 52-week low of EUR 3.15 on March 9 – Artnet’s shares have taken off. On Thursday, October 15, Artnet closed at EUR 4.88, marking a 22.3% improvement for the month. The next day, however, the stock closed up yet another euro at EUR 5.88, which brings its cumulative October improvement to 47.4%. Another EUR 0.77 increase and Artnet will reach the 52-week high it achieved on June 10 (EUR 6.65). Despite this month’s newfound excitement, Artnet, like Sotheby’s, has quite a bit of lost territory to cover in order to reach the levels it was trading at in late 2007.

Of these three firms, only Artnet has announced the publication of its Q3 financial statements, which will take place on October 30. This reporting should give us a better indication of whether the recent strong performance is due to solid fundamentals or general excitement in global equity markets. Further updates will follow in upcoming issues of Skate’s Market Notes, as well as in the November edition of Skate’s Art Industry Investment Report.

Excitement at Frieze: Francis Bacon Sale to Highlight 2009 Fair

October 9, 2009

On October 8, Bloomberg ran a story on the Frieze Art Fair in London that will preview next Wednesday and open officially on Thursday and run through Sunday. Always a major event in the art world, this year’s Frieze Art Fair will be a big test to see whether the art market is definitely in a state of recovery.

One major event to follow at Frieze this year is the sale of Francis Bacon’s Study from the Human Body after Muybridge (1988), which is expected to fetch USD 9 million. Following a major valuation step-up at the height of the recent art market boom of 2007-2008, Francis Bacon currently has 44 works in Skate’s Top 1000, and he is listed as Skate’s 5th most valuable artist overall with a market capitalization in our ranking of USD 636,110,982. Below we present two tables containing peer groups of Bacon works; the first covers his “Human Body” paintings and the second his works that have sold in a similar price range of USD 8-10 million.

Exhibit 1 – Peer Group for Francis Bacon’s “Human Body”

Work Sale date Premium price, USD
Study from the Human Body, Man Turning on the Light 14.10.2007 16,465,701
Studies of the Human Body 08.05.2001 8,585,750

Exhibit 2 – Peer Group for Francis Bacon (USD 8-10 million)

Work Sale date Premium price, USD
Portrait of George Dyer staring into a mirror 23.06.2005 8,994,169
Study from Portrait of Pope Innocent X by Velazquez 08.02.2006 9,016,584
Self-portrait 08.02.2006 9,016,584
Landscape with car 20.06.2007 8,490,853
Studies of the Human Body 08.05.2001 8,585,750


More interesting than yet another entry by Bacon into Skate’s Top 1000 (entry is subject to disclosure of any sales commissions) is the greater market context – the fact that Study from the Human Body after Muybridge is being sold at an art fair rather than at auction. Twenty-one works of art have been sold for more than USD 8 million in 2009, all of them taking place during last spring’s auctions. The fact that the Pavilion of Art & Design London fair, the satellite to the Frieze Art Fair where the Bacon painting will be offered, will carry the highest-valued sale yet this fall very likely serves as another reminder of just how much the market has turned toward the buyer – regardless of what happens later this fall at the major art auctions. Buyers to a certain degree remain skittish about what they perceive as still high auction house estimates and the high premiums that come on top of hammer prices. It is quite possible that dealers have recognized this and will continue to find ways of offering high caliber works like Study from the Human Body after Muybridge at art fairs, which present fewer transaction costs. It is a trend worth following.

As for the dealer side, in the words of Gerard Faggionato, the London-based dealer offering the Bacon work who is quoted in the Bloomberg story, “There’s been a change from galleries asking who they want to sell to, to collectors asking who they want to buy from… People will wake up next week. Everybody’s waiting to see what will happen.”

Strengths and Weaknesses in the Chinese Art Market

October 5, 2009

Several news reports in recent weeks focusing on the market for Chinese artworks have highlighted the degree to which that market has seen various strengths and weaknesses emerge, especially in light of the global financial crisis and the softening of demand for fine art worldwide.

On September 24, The Wall Street Journal ran a story by Alexandra Peers (see “The Sale of Chinese Antiquities Remains Recession Proof”) highlighting strong sales of Chinese antiquities at Sotheby’s and Christie’s in mid-September. In total, approximately USD 56 million in sales were made during the auctions, which, according to Peers, were well ahead of expectations this year but considerably behind what similar sales would have brought a year ago before the global art boom began to fizzle.

Contemporary Chinese art, however, is a different story altogether. On October 2, The Wall Street Journal published a piece by Ian Johnson and Sky Canaves (see “Artists Test Limits as China Lets (a Few) Flowers Bloom”) which focuses on the political freedoms of contemporary Chinese artists and what the Chinese government’s willingness to allow artists a greater range of expression means for the future of Chinese contemporary art. The deflating bubble of Chinese contemporary art may actually bode well for the sector in the years ahead, as less pressure for artists to conform to market demands today could have the effect of encouraging greater diversity in creativity, thus setting the stage for a stronger and more mature market in the future.

October’s auctions of Asian art in Hong Kong will be a major test not only for the greater regional market but the market for Chinese works in particular. None of these auctions is promising prices that could come anywhere close to the prices fetched at the height of the boom from 2006-2008, but failure to approach mid-range estimates or better for the majority of the works would give us a good indication as to how strong the market is and, some might argue, how robust the region’s economic revival this year has really been.

A recent article by Le-Min Lim of Bloomberg (see “Chinese Collectors Set to Boost $100 Million Hong Kong Auction”) highlights some of the major sales taking place at Sotheby’s over the next week. The five-day event in Hong Kong starts on Monday, October 5 with an auction devoted to Fine Chinese Paintings. Although the estimates for these paintings are low compared to the sales Skate’s normally follows – the highest valued work, Wu Guanzhong’s Placid Mountain Village, has been assigned a pre-auction estimate of USD 451,612 to 645,161 – the results should provide a good indication of how higher valued works will perform later this week and throughout the rest of the auction season.

One higher valued work to pay close attention to is Sanyu’s (Chang Yu) Lotus et poissons rouges (Lotus and Red Fish), which will be sold at Sotheby’s 20th Century Chinese Art Auction in Hong Kong on Tuesday, October 6. Sotheby’s has assigned a pre-auction estimate range for the painting at USD 1,935,602 to 3,225,764. Earlier this year, the sale of Sanyu’s Cats and Birds for just over USD 5.4 million at Christie’s Hong Kong tested Skate’s Top 1000, and in November 2006, just as the boom in Chinese art was underway, the artist’s Potted chrysanthemum in a blue and white jardiniere fetched a respectable USD 3,758,354, which was well above Christie’s high estimate at the time of USD 899,742. We are not in the midst of the 2006 market boom, however, and barring a miracle, neither Lotus et poissons rouges nor any of the other artworks being auctioned this week at Sotheby’s will come anywhere close to approaching Skate’s Top 1000 threshold price of USD 5.73 million.

In our next issue of Skate’s Art Industry Investment Report, we will continue to follow important sales of Chinese art and will focus on several high-profile auctions to be held by Christie’s Hong Kong at the end of November.

Regardless of what happens this week at Sotheby’s in Hong Kong, Skate’s believes that the Chinese and greater Asian art markets still hold potential for considerable growth in the years to come. Once the regional and global economies begin to see even greater and more sustained growth, we would not be surprised at all to see more works from this part of the world enter Skate’s Top 1000.

Click here for access to the rest of Skate’s Art Industry Investment Report for October


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