Insights into the Premium Market for Zao Wou-Ki’s Artworks

April 23, 2013

On April 9, the art world lost one of the most prominent artists of a generation. Zao Wou‐Ki, an abstract painter with mixed French and Chinese heritage, passed away at 93. During his life Zao Wou‐Ki had the opportunity to observe the incredible performance of his artworks on the international auction market. He was the 5th most valuable living artist worldwide and the 56th most valuable artist in general, according to Skate’s Top 5000.

The premium market for Zao Wou‐Ki was formed in 2006 when auctions saw his works fetch prices above USD 2 million. Ever since, these works, which have appeared on the market irregularly, have often caused substantial interest on the part of international buyers with sales doubling or even tripling pre­‐auction estimates.

The total value of Zao Wou‐Ki’s 36 artworks in Skate’s Top 5000 is USD 132.4 million. 2011 was the strongest year in the history of his market with the total value of artworks entering Skate’s rating reaching USD 36 million.

Artworks by Zao Wou‐Ki have been sold at four key auction houses, including Poly International Auction, Ravenel, Sotheby’s and Christie’s. The latter accounts for 53% of the value of Zao Wou­‐Ki’s premium works sold.

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Poly: In Start of Global Expansion, a Quiet Power Establishes Permanent New York Presence

May 15, 2012

Beijing Poly International Auction Co. Ltd is not even seven years old, but it is the world’s third largest auction house, selling RMB 12.2 billion worth of art (USD 1.9 billion) in 2011. It remains in the third spot so far this year, trailing behind Sotheby’s and Christie’s in terms of trading volume.

Skate’s covered the rise of Poly on July 26, 2011, and this week we learned the latest updates from the company concerning their strategy and vision going forward.

So far Poly’s business has been squarely focused on Asia, specifically on China where the absolute majority of its art-buying clients reside. The firm acknowledges that its meteoric rise could have not been possible without backing from its parent, China Poly Group Corporation, a diversified state-owned holding group with commercial interests in industries ranging from arms to culture. This support, which includes funding for the Poly Art Museum—the largest corporate museum in China—has helped to build up domestic demand for the Chinese artworks that are Poly’s primary offering. It is also helping Poly to achieve its first strategic objective, which has been to put Beijing on the map as one of the world’s art trading capitals.

Poly currently trades in four auction categories: ancient Chinese art and calligraphy, pre-modern art and calligraphy, contemporary art, and antiques. It does well in each of these categories, eating away market share from the world’s major auction houses in the Chinese art segment (the fastest growing globally) and efficiently blocking attempts of smaller rivals like Philips with their BRIC strategy to venture in the category.

Poly’s strategy was timed perfectly. The surge of Chinese art acquisitions could have brought a bounty of revenue and profitability growth to international auctioneers, but instead thanks to efforts from Poly and smaller auctions like China Guardian (incidentally, a name that is itself very characteristic of a Chinese art market strategy) it helped to create a powerful domestic art auction industry in the emerging world’s superpower. This new Chinese industry now intends to go global; China Guardian was the first to set up operations in New York, and Poly has just followed.

Beijing Poly International Auction Co. Ltd is smart in its approach to global expansion. It began by educating the global art market community about the strength of its domestic distribution capabilities for Chinese art. Just a few years ago when Christie’s wanted to auction famous fountainhead bronzes in Paris it ran into considerable controversy as official China attempted to block the sale. The Chinese now put forward purely economic arguments for consignors—why consign important Chinese works to global auctions if Chinese auctioneers offer better sales channels? Poly has spared no expense in proving this point, sending its marketing team to European cities this summer to educate potential consigners about the company’s distribution capabilities. Poly intends to play aggressively in New York as well, having purchased real estate for its New York headquarters on West 44th Street and establishing a fully staffed office to focus on U.S. expansion, specifically the sourcing of Chinese material from the vast community of U.S.-resident Chinese and American collectors of Chinese art, clearly the largest international source of Chinese works of art.

This strategy will work. Poly should be recognized as a lasting and increasingly global force in the international auction business. Move ahead four or five years, and Beijing Poly International Auction Co. Ltd will greatly dominate the global trade in Chinese art by adding a strong client roster of international consigners to its domestic Chinese buy-side clientele, the firm’s original competitive advantage. This growth will set the stage for Poly to challenge the high-end market oligopoly of Sotheby’s and Christie’s. Unless the powerful duo of global auctions established in the 18th century finds a way to defend its market position and discover new sources of growth, the seven year-old Chinese rival will increasingly depress Sotheby’s and Christie’s equity story well before it starts hiring away key employees in New York.

We continue to expect that Poly will go public soon. Although Beijing Poly International Auction Co. Ltd officials declined to comment on the matter, it really does make sense for Poly to float its shares as it starts Western expansion. It could benefit from exceptionally favorable valuations for art stocks, as was recently proven by the IPOs of Abbey House in Poland and Weng Fine Art in Germany. That said, the art market is not the place where one necessarily needs to be transparent about ownership. We just observed Frieze get away with its entry into the New York art fair market without even being asked about the funding sources behind the lavish Randall Island extravaganza. Frieze is notoriously secretive about its beneficial owners, and in that context Poly can well be called a model of transparency: it is a Chinese government sponsored international expansion of the art trade and Chinese cultural mission executed by a Beijing-headquartered firm beneficially owned by Chinese state. It’s as simple as that. Now, the company is in New York.

To read the full article with data, please click here.


Monthly Art Investment Ideas – April 2012

April 1, 2012

In this Issue:

  • Chinese Art Market Research Based on Skate’s Top 5000
  • Entries to Skate’s Top 5000 in March 2012
  • Top 5 Art Investment Ideas for April 2012
    • Zhang Daqian, Guan Yin
    • Zhang Daqian, Lotus in the wind
    • Wu Guanzhong, Victoria Falls
    • Wu Guanzhong, Snow mountain in spring
    • Zao Wou-­‐Ki, 25.06.86

To read the full report, please click here.


Sotheby’s Six Month Report: Strong Results Lead to Astonishing Cash Numbers with Private Sales Becoming the Fastest Growing Line of Business; Dutch Exit and China Acquisition; Strong Buy Rating from Skate’s

August 10, 2011

Since last year, Skate’s has argued that it would make considerable sense for Christie’s to go public in 2011 given the generous valuation multiples in the art industry. The momentum, at least for this year, has been lost for Christie’s, as recent global stock market turbulence coupled with a stream of IPO cancellations have made it clear that investors’ appetite for new deals has fallen significantly. Francois Pinault was apparently unable to jump on the IPO bandwagon last year given the previously planned departure of Edward Dolman, the CEO of Christie’s for over 10 years who announced his move to the Qatar Over the past several weeks, a rollercoaster ride on global equity markets has taken investors’ attention away from news on individual companies and resulted in a massive sell-off of shares across the board. Although the impact of S&P’s U.S. debt downgrade and continued European debt troubles have yet to be fully digested by the market, now is a good time to revisit the fundamentals and take a closer look at the financial results of the major companies that make up Skate’s Art Stocks Index.

In this issue of Skate’s Market Notes, we will profile Sotheby’s, which published its second quarter and first half results on August 3 (the full report can be found at Skate’s Art Stocks & Funds section at http://www.skatepress.com).

To read the full article with data, please click here.


New Star in the Global Art Industry Rises from the East (Expect IPO in 2012) or How the Chinese People Liberation Army Built the World’s Third Largest Auction House in Just 6 Years

July 26, 2011

Since last year, Skate’s has argued that it would make considerable sense for Christie’s to go public in 2011 given the generous valuation multiples in the art industry. The momentum, at least for this year, has been lost for Christie’s, as recent global stock market turbulence coupled with a stream of IPO cancellations have made it clear that investors’ appetite for new deals has fallen significantly. Francois Pinault was apparently unable to jump on the IPO bandwagon last year given the previously planned departure of Edward Dolman, the CEO of Christie’s for over 10 years who announced his move to the Qatar Museums Authority earlier this summer. Christie’s is now unlikely to entertain any plans for an IPO in the immediate future as it digests the leadership change. The only art industry firm that benefited from the great window of opportunity was Poland’s Abbey House, which successfully listed in Warsaw in May, as well as Switzerland’s MCH Group, which completed a new issue this summer.

There is an interesting new story to tell, however, as Skate’s has learned that the next art industry IPO will take place in China and will be made by Poly International Auction. Should the IPO take place as we expect, it would create the world’s second largest publicly traded art industry company after Sotheby’s.

To read the full article with data, please click here.


Some Musings about the Future of the Chinese Art Market

April 18, 2011

Earlier this month, Artprice, a company led by its principal shareholder, an eccentric Frenchman by the name of Thierry Ehrmann, released its annual report on the outcome of the art market in 2010, using the Chinese flag as its cover page. The key conclusion of the report was that China has become a leader in the auction segment of the global art market (“electric shock to the world history of the art market,” commented Artprice). Almost simultaneously, London-based ArtTactic published a report titled “China Art Market Confidence Reaches New High,” which states that the company’s measurements for the investment quality of different art market segments show that “the Chinese contemporary art market has moved into first place in terms of Market Confidence and is currently 21% above the U.S. & European market Confidence Indicator” (although what exactly “confidence” means remains unclear). Finally, the first week of April, traditionally the “Chinese Week” in the global auction market, once again proved the favorable situation for this segment by bringing 22 entries to Skate’s Top 5000 (our ranking of the 5,000 most expensive works of art on the basis of auction prices). Of these 22 sales, three were repeat sales with annualized investment returns ranging from 19.7-93.8% (on a USD basis). In addition to all the market buzz in April, the arrest of one of the most recognized (though by no means the most valuable) modern Chinese artists, Ai Weiwei, only served to further emphasize the impetuous nature of the Chinese art market.

In our opinion, the Chinese art market is definitely seeing some turbulence, although it is still too early for it to be given the status of “global art leader.” Going forward it seems that China has become the main center for speculation on the art market and perhaps the riskiest segment of the global art market. When it comes to the premium (investment) segment of the global art market monitored by Skate’s Art Market Research, China is far from dominance by every indicator. The most valuable Chinese artist (Zhang Daqian) occupies the #62 spot in the ranking of global artists by market capitalization (the total auction value of works sold in the price range of Skate’s Top 5000). Although the largest Chinese auction house (Poly International Auction) has challenged the world’s third largest, Phillips, it still remains only the fourth largest auction house in terms of premium (investment) quality art sales. Finally, the total value of artworks by Chinese artists in Skate’s Top 5000 is less than $800 mln, which is far behind the market value of European and American artists, although it does exceed the aggregate market value of works by Russian artists by a factor of 2.5.

The main driving force behind the boom in the Chinese art market is a simultaneous increase in the number of wealthy people in China and their income growth, which is superimposed on the consequences brought on by the recent global financial crisis, especially the deep skepticism of many investors concerning the possibility of protecting and increasing their capital through traditional investment tools. The practice of art investment, which has deep historical and cultural roots, is widely recognized in China as a reasonable strategy for alternative investment. China’s economic prosperity on the one hand (earlier this year, China officially became the second largest economy in the world after the United States) and an age-old proven global formula of value creation on the art market through a constant and significant source of demand (from medieval royal courts up to today’s private museums) have indeed made China one of the world’s most important art market centers. Yet, from an investment point of view, China is the global leader of venture capital and highly risky investment in “new art,” but it is not a global center for art investment that aims for capital protection, something New York and London can more reasonably lay claim to.

When observing the enchanting variety of names, periods, themes and styles created by contemporary Chinese artists and consumed by the local art market (with a less significant share of foreign capital in the total volume of transactions), one of the most interesting things seems to be the swift creation of “new brands” on the Chinese art scene. Thus, in 2010 Zhang Daqian became one of the world’s most frequently traded artists in the price segment above $1.8 mln (i.e., the threshold of Skate’s Top 5000). At the beginning of 2010, Zhang Daqian was represented by only two works in Skate’s Top 5000 and statistically was barely different from several dozen other 20th century Chinese artists who were selling at similar prices. In a bit more than a year, the speculative Chinese market catapulted Zhang Daqian, making him the undisputed leader in this segment with a nominal market capitalization of $97 mln and an average annual rate of return of 23.7% for repeat auction sales. During the “Chinese” auction week in early April, every fifth work sold above $1.8 mln was created by Zhang Daqian.

Zhang Daqian’s striking rise compared to his peer group of artists is very similar to the rapid growth in the markets for Andy Warhol, Jean-Michel Basquiat and Gerhard Richter. Does this mean that a Chinese art investment object comparable to Coca-Cola, General Electric and Siemens in terms of liquidity and investment potential has appeared? Probably not yet. Unlike China’s CNPC oil monopoly and the world’s largest mobile operator, China Mobile, Zhang Daqian and other most Chinese artists of his era lack an export component of ideas and images that would make it universally appealing to investors and collectors all over the world. The time test for the art market is the ability of art objects to occupy a permanent place in the pantheon of artistic heritage of world civilization, to become a part of the universal system of cultural and historical values of humanity. It remains to be seen whether Chinese artists will pass this time test.

Yet, the art market recognizes the importance of Chinese capital, and the most experienced dealers and gallery owners are trying to play a well-tested game of involving the “new bourgeoisie” (New Chinese) in the building of their own names and social roles through the patronage of the arts. But this does not mean that the global museums are willing to transfer substantial resources to Chinese contemporary art exhibitions or that international private collectors are ready to invest more time and money in the development of the Chinese cultural idea. Rather, a more natural strategy for the global establishment would be to export Western art and art market methods to China, obtaining significant income in exchange for recognition of China’s economic power.

History is repeating itself, moving into a new geographic territory. Like China today, during the postwar years new industrial and financial elites in the United States attracted Europe’s art elite and was the largest source of demand on the art market. Demand dominance gradually transferred into supply dominance as an American cultural environment and art market infrastructure produced and “sold to the world” names that symbolized the economic and intellectual leadership of the United States.

Today China is not the world’s main art market; rather, it is the most rapidly growing source of demand standing at the T-intersection of the “Japanese” and “American” ways. If it turns to the right, strengthening its role in global politics and economics, China will be able to integrate its national culture into the modern global context for several decades, erecting its own Pollocks, Lichtensteins and Warhols (both in terms of fame and value). If it turns left, it will fall into the Japanese impasse, where artificial self-isolation, a society closed to foreigners and infantilism on the world stage have turned the Japanese miracle of the 1980s into the Japanese economic nightmare of today. This is manifested by Murakami’s role as the most valuable Japanese artist of all time (only 128th in Skate’s ranking) and Japanese art greatly trailing that of China, with Murakami separate from his countrymen of different ages, forgotten and out of demand.

To read the full article, including data charts, please click here.


2011 Trend Watch: Chinese Collectors, Modern Western Art?

January 3, 2011

Will Chinese Collectors Expand Their Repertoire Beyond Chinese Art?

Last summer, Xinhua reported on mainland China’s billionaire art collectors poised to take the international art market by storm, after an anonymous telephone bidder, believed to be Chinese, purchased a Pablo Picasso work at Christie’s for a record-breaking $106.4 million dollars. The article quoted Ken Yeh, chairman of Christie’s Asia in Hong Kong, as saying: “Chinese mainland buyers have only just started buying impressionist works so there is a lot of potential for this to go a lot further than it already has.” In the same article, Mei Jianping, professor of finance at Cheung Kong Graduate School of Business in Beijing and co-creator of the Mei Moses Fine Art Price Index, compared the nascent trend to the Japanese spending spree during the late 1980s, which helped fuel an increase of more than 200 percent in the Impressionist Art Index charted by Mei Moses Fine Arts. Mei contended that “we could be at the start of another spectacular impressionist boom,” powered by the desire of Chinese collectors to demonstrate their sophistication and stature as great collectors. But Ben Brown of Ben Brown Fine Art in Hong Kong and London was of the opinion that the predicted boom might be mostly hype.

Since then, mainland Chinese collectors have been making splashes at Hong Kong auctions and sales specifically targeted to this clientele…

To read the full article, please visit Jing Daily.


Blue-Chip Chinese Artists Sell Alongside International Heavyweights At Abu Dhabi Art Fair

November 17, 2010

The recently concluded Abu Dhabi Art Fair was a success in more ways than one for top Chinese contemporary artists. Not only were they exhibited alongside other global heavy-hitters like Anish Kapoor, Damien Hirst and Andy Warhol, but works by Ai Weiwei, Zeng Fanzhi and Yan Pei Ming sold to unnamed collectors and institutions.

All three artists were represented at the fair by major international galleries, with Ai represented by Gallery Hyundai, Zeng by Hanart TZ Gallery, and Yan by David Zwirner…

To read the full article, please visit Jing Daily.


Warhol & Wang: The Enduring Allure Of Pop Art

November 11, 2010

This past Tuesday, collectors flocked to Christie’s New York Evening Sale of Post-War and Contemporary Art, bidding for works by top pop artists like Roy Lichtenstein, Louis Bourgeois, Mark Rothko and the star of the auction, Andy Warhol. Bringing in a total of $222.4 million, above its high $214.5 million estimate, and setting six new artist records, the auction indicated that art by blue-chip artists remains broadly recession-proof, and solidifies Warhol’s place at the top of the pop art heap. From the New York Times:

There is no denying this is Warhol’s season. His “Coca-Cola [4] [Large Coca Cola]” had seven bidders competing for it and finally sold to a telephone bidder for more than $10 million above its $25 million high estimate. The price was even more impressive considering that the collector Elizabeth Rea, who was selling it, bought it with her husband Michael at a Christie’s auction in 1983 for $143,000.

It has certainly been an interesting year for Warhol-watchers. This June, the sustained confidence in Warhol seen among Western collectors appears to have rubbed off on bidders in Hong Kong, as a set of 10 Warhol “Mao” screenprints sold at auction there for HK$6.6 million (US$852,000), well over their pre-sale estimate of HK$5 million…

To view the full article, please visit Jing Daily.


Strong Sales For Chinese Artists At Sotheby’s, Christie’s Auctions

October 20, 2010

Last weekend at both Sotheby’s and Christie’s in London, collectors indicated that the upward momentum we’ve seen in the prices of works by blue-chip Chinese artists at recent auctions continues to gain steam. At Christie’s Day Sale of Post-War and Contemporary Art, works by Zao Wou-Ki, Chen Zhen, and Wang Guangyi went well above high estimates. To put the Chinese sales into context, 100% of works by Chinese artists sold, compared to 66% of overall lots sold at the auction.

Chen Zhen’s work “Uninterrupted Voice” was particularly notable at this auction, selling for $386,483, more than double its high estimate of $160,100. Additionally, the performance of Wang Guangyi at Christie’s — as well as Sotheby’s — last week hints that Wang’s appeal among new collectors is growing…

To read the full article, please visit Jing Daily.


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