Fallout from the global economic crisis hits the opening sale of modern and contemporary Asian art at Sotheby's in Hong Kong
While much of Hong Kong hunkered down just hours before the arrival of a typhoon on Oct. 4, the start of Sotheby's three-day auction of modern and contemporary Asian art was buffeted by the financial storm on Wall Street. Of the 47 works that went under the hammer, more than 40% were unsold. What's more, earnings for Sotheby's (BID), including the auctioneer's commission known as the "buyer's premium," were a paltry $15 million, accounting for just 41% of the auction house's estimated takings for the night. Among the biggest upsets was the unsold work by India's hot-selling artist Subodh Gupta, Untitled, which had an estimated price of $1.55 million to $2.05 million. Another big surprise: Chinese cynical realist painter Liu Wei's triptych, The Revolutionary Family Series, failed to find a bidder willing to meet the $1.55 million suggested minimum.
As the weather deteriorated on Sunday morning, so did events in the auction hall. Only 39 out of 110 paintings from the 20th Century Chinese Art Sale found buyers, while 71 had to be packed up and shipped back to their sellers. By the afternoon session, the usual buzz at Hong Kong's contemporary Chinese art auctions was sorely absent. At one point during the sale, the auctioneer mistook a woman covering her mouth to stifle a yawn for her wishing to bid, prompting a valiant attempt to inject some levity into the proceedings as he asked if "anyone else is yawning in the room."
Yawns gave way to disbelief a little later when two works by white-hot Chinese artist Zhang Xiaogang went unsold. That's a huge reversal for the Beijing-based artist, whose paintings have routinely fetched millions of dollars, well in excess of auction estimates. (His painting Bloodline: Big Family No. 1 was one of the few top lots that sold on Saturday, though the $2.97 million price was below the expected maximum.) Yue Minjun and Zeng Fanzhi, two others among the hottest-selling Chinese contemporary artists, did manage to sell, although well within the estimates.
Wall Street Fallout
You connect the dots: Wall Street goes into meltdown, and Sotheby's auction bombs in Hong Kong. Kevin Ching, Sotheby's CEO for Asia, tries to be optimistic about whether the two are connected. "I hope there is no immediate direct correlation between the financial market and the art market," he says, pointing to the widely successful auction of enfant terrible Damien Hirst's works in London within days of the collapse of Lehman Brothers. The problem with some of the Hong Kong auction, he adds, stems from overly ambitious owners trying for unreasonably high prices. "When we have [sellers] who want aggressive estimates over and above what [the] market can accept, they would have to occasionally accept the consequences, and I think that's what happened here [Saturday] night," Ching explains.
Still, others in Asia's art business are certain the fallout from Wall Street is already hurting Chinese and Indian markets. In both countries, newly wealthy investment bankers and hedge fund managers helped inflate bubbles (BusinessWeek, 6/5/06) in works by local artists. For instance, in the last four years a booming Indian economy (BusinessWeek, 6/5/06) and buoyant stock market encouraged many private banks to offer fee-based services to assist clients in building portfolios of artworks sourced from galleries, auctions, and even direct sales. Fund managers say that investment bankers with their hefty bonuses helped inflate art prices by 30% to 60% above their real value, according to a gallery owner in Mumbai.
Now with Wall Street in turmoil, most of the bankers who were regulars at art shows and auctions have moved out, says avid art collector Harsh Goenka, chairman of India's diversified RPG Enterprises, which has interests in tires, power, and retail. He claims that in the last few years, around 60% to 70% of art sold in auctions and shows in India went to the new breed of investor rather than art connoisseurs. "They looked at art as a brand and made money by trading in it," says Goenka. In the past few months, he says, painters and art dealers have been calling him up to offer their unsold works at a 30% to 40% discount.
The picture isn't all grim, though. The mood was positively ebullient at Sotheby's Hong Kong on Oct. 6 as buyers crammed the room for the auction of Southeast Asian contemporary paintings. Sotheby's employees manned the phones to handle enthusiastic overseas bidding. For instance, Indonesian painter I Nyoman Masriadi had already set a personal record on the first day of the Sotheby's auction when his huge canvas featuring Batman and Superman sitting on adjacent toilets sold for $620,000. He then surpassed that with a painting of boxers that seems part Botero, part Léger; it fetched a high $833,000. A bit later, during furious bidding for yet another Masriadi, the auctioneer exclaimed "This is really, really fun." The room broke into applause when the work finally sold for a very respectable $307,000.
The reason for this sea change in sentiment? The prices were far more affordable than the works from China and India on sale during the weekend, and collectors seem to have finally cottoned onto the notion that Indonesian, Vietnamese, and Filipino artists represent opportunities for collectors to own great art. One work by up-and-coming Filipino painter Geraldine Javier sold for $32,000, more than three times the high estimate. An intimate portrait of a woman and child by Vietnamese painter Mai Trung Thu also sold for triple the estimate, fetching $23,000.