Bad timing hurts auctioneers’ plans

Hong Kong looked good to Asian auction houses — at least it did before the meltdown


One of the positive developments that Jonathan Stone, head of development in Asia for Christie’s, saw in the otherwise disappointing contemporary-art auctions held this month in Hong Kong was that they “showed that Hong Kong has become the center of contemporary art in Asia.”

An indication of the island’s ascension to the status of “Asian contemporary art capital” was the rush with which the region’s homegrown auction houses have started to move there this season. Of course, with the economy as it is, and buyers apparently pulling out of what had been the area’s strongest commodity — Chinese contemporary art — their timing couldn’t have been worse.

In 1973, Sotheby’s was the first Western auction house to set up shop in Hong Kong. Christie’s followed in 1986. This put them in the water in time to ride the Chinese art wave from start to finish. In a 2004 Sotheby’s auction, a Yue Minjun painting went for just HK$ 600,000 (¥7 million) — a far cry from the HK$54 million (¥644 million) he achieved four years later.

Asia now boasts dozens of its own homegrown auction houses. The majority of those in China, such as Beijing Poly International Auction, have sprung up in the last three years. At the height of the China bubble, in May this year, Poly’s Modern and Contemporary Chinese Art Evening Sale amassed 184,318,000 yuan (¥2.5 billion).

Japan’s auction houses have been around for quite a bit longer, and in theory that should have stood them in good stead for taking on the newcomers. Japan’s largest house, Shinwa Art Auction, is celebrating its 20th anniversary this year. Est-Ouest and Mainichi have been around since 1984 and 1973 respectively. Contemporary art, however, has never been their forte.

When asked about the timing of Shinwa’s 2006 move into contemporary art, the company’s managing director Shinji Hasada said that it had been “something we had been considering for a few years, and it just happened to come to fruition in 2006.” (Est-Ouest went contemporary in 2005.)

Commentators speculate that the reason for their moves was a perception that demand was shrinking for what had long been their main staple: modern art, which includes everything from Western Impressionists to yoga (Western-style) and nihonga (Japanese-style) painting by local artists.

“The market for modern art has dried up, I think because there has been a change of generation in the collectors,” commented one gallery operator who preferred to remain anonymous. “The collectors in their forties are more interested in contemporary art.”

If that is so, it means that companies such as Shinwa and Est-Ouest, which are slowly shifting their eggs to the contemporary basket, are in similar positions to the new auction houses, such as China’s Poly, in that they are vulnerable to violent fluctuations in the contemporary market, such as those seen these past two weeks.

Their positions have been made all the more perilous as many of these homegrown auction houses made the fateful decision earlier this year to take their first, oddly coordinated steps to expand their operations this season.

At the beginning of this year, South Korea’s largest auction house, Seoul Auction (established in 1998), announced on its Web site that it planned to open an office in Hong Kong in August and hold its first Hong Kong auction in October, with an eye to “expand(ing) our business all over the Asian art market.” Both the office and auction were realized, with the sale selling a fair 65 percent of lots. The group was lucky to avoid the stock-market dive that occurred at the end of October, but a spokesman said it is not definite that it would continue holding auctions in Hong Kong.

China’s Poly also chose autumn 2008 to hold its first Asian Contemporary Art Auction at its Beijing base. Poly’s Web site quotes Xu Juan, manager of international art department, explaining that, “contemporary artists in other Asian countries also produce good quality works, and their prices are relatively low now. The Asian art market is developing to a brighter future. We expect collectors to enter the Asian contemporary art market with us in autumn.”

Unfortunately, not many did. The Beijing auction resulted in sales of just 52 percent by lot. Paintings by Japanese favorites, such as Yoshitomo Nara, for example, went unsold.

Est-Ouest opted to take not only its contemporary art auction, but also its regular modern western art and Art Nouveau and Art Deco sales to Hong Kong, in the last week of November. None fared well; the Asian Post-War & Contemporary Art auction had results similar to Christie’s the following week. Just 52 percent of lots were sold. One employee of a Hong Kong gallery reported “work after work was passed in (went unsold). It was not good.”

A week later it was Shinwa’s turn. Through a clever piece of organization, president Yoichiro Kurata managed to convince two other Asian auction houses to come on board to share costs. South Korea’s K Auction and Taiwan’s Kingsley’s Auction joined Shinwa in what was dubbed “Asian Auction Week.” It was held in Macau, at the Venetian Hotel Resort.

K Auction CEO Kim Soonung was nervous from the outset. “I’m not confident,” the former banker said before the first hammer fell.

Kingsley’s vice-general manager Christine Cheng, put a slightly more positive spin on the operation, saying “We believe this event will provide an opportunity to attract new customers in Macau.” She pointed out that despite its relatively high average incomes, the region has only “one and a half art galleries — the half is a souvenir shop selling prints to tourists.”

It was left to Kurata to put the event in the context of the current downturn, and to explain the rationale behind three auction houses joining forces.

“For Asian auction houses to survive, we have to share our resources. In the past we all jealously guarded our clientele, but here, by holding our auctions together, we are proposing a totally new, cooperative approach, where we share customers,” he said.

Was this a ploy for the homegrown auction houses to compete with their larger Western rivals?

“We don’t see them as rivals. We all have to get along together,” said Cheng.

But not even the customer sharing was enough to whip up pleasing results. Shinwa sold just 52 percent of its almost 400 lots and K sold 55 percent. Kingsley’s did better, selling 69 percent.

“If an auction house sells over 90 percent of its lots, it is doing well,” Kurata had obligingly explained the day before the auction. “Around 50 percent, and it’s not good.” Still, Kurata is confident that his approach is correct. “We will be back to hold another auction next year,” he said. Est-Ouest echoed the sentiment with a spokeswoman saying it has another auction scheduled for May.

Those houses’ determination to continue selling contemporary art, and to do so in Asia, suggests they realize future growth can no longer be expected in the familiar market of modern art in Japan.

That means auction houses here and throughout Asia are on a steep learning curve. Even cracking the contemporary market at home is proving difficult for some. Auction house AJC, which was Japan’s third largest house by value of works sold in 2007, held its first contemporary art sale in autumn last year. This year, a spokesperson said, “We just didn’t get enough interest,” so it had abandoned the genre.

Perhaps the last word should go to Shinwa’s Kurata. With characteristic frankness he explained, “The tough economic climate will continue for a while to come. In order to get through this we have to prepare ourselves, find new ways of doing business, like collaborating on auctions. The Western companies would never do this, but I think it’s a viable model in Asia.”