12 March 2014

Money in (Malaysian) Art

Besides helping corporations build its collection, art consultants also dispense financial advice in business newspapers, remarking about "...Malaysian contemporary works, and its investment potential." As an advocate of active asset management and living within one's means, the notion that local art can be considered as a monetary investment is bizarre. Looking only at Malaysian auction transactions of the past five years, the small dataset is already a risk; But of course every marketplace has to start somewhere. Limited supply relates to a short visual arts history, resulting in the relatively high selling rate of ~93% at local auctions. Attending one can be quite fun, as "it looks pretty much rigged, anyway." This applied observation from Carole Cadwalladr is half-serious, but the spectacle is comparable to a KL property auction, albeit with a smaller crowd.

Chang Fee Ming – At Low Tide (Dar Es Salaam) (2005), sold for RM 30,800 (est. RM 2.5-5,000) at Henry Butcher Art Auction Malaysia, Lot 47, 6 May 2012

The Malaysian pasar suffers from the same issues as other art markets – it is opaque and unregulated. A large majority of transactions take place in the primary market and private sales, where price transparency is sketchy. In the secondary market, Melanie Gerlis notes that “(u)niversally accepted practices—such as including the buyer’s premium (10% in Malaysia) in official auction results but not in the pre-sale estimates, and then comparing one with the other as a measure of success—are at best absurd, and at worst highly misleading to the uninitiated.” While other associated costs like guarantees are not applied here, maintenance of artworks itself can be costly, e.g. insurance, storage, dealer/consultant, etc. Art is illiquid and “not ‘fungible’, meaning that you can’t sell just a bit” (Georgina Adam), which makes hedging that bit more costly and onerous.

Seah Kim Joo – Buffalo Tender, sold for RM 11,000 (est. RM 5.5-7,500) at KLAS Art Auction, Lot 59, 19 January 2014

If one has been collecting Malaysian art since 15 years ago or longer, one’s works will almost certainly fetch a good return at auction houses today. Competition with trophy-hunting billionaires is minimal, although authentication remains a risk in this immature ecosystem. Based on data analysis of the available figures, my speculative market report will look like this: For blue chips, i.e. high-priced but guaranteed returns, go for Chang Fee Ming or Ibrahim Hussein; For penny stocks, i.e. low-priced and potentially high returns, go for Lui Cheng Thak or Seah Kim Joo. Other medium term calls are BUY Kow Leong Kiang or John Lee Joo For, HOLD Wong Perng Fey or Chuah Siew Teng, and SELL Jolly Koh or Huang Yao. TRADING BUY call is for Ahmad Zakii Anwar or Tew Nai Tong.

Wong Perng Fey – Doorway II (2000), sold for RM 16,500 (est. RM 13-18,000) at Henry Butcher Art Auction Malaysia, Lot 48, 21 April 2013

A recent research that mined a database of 20,000+ paintings sold, concluded that the true return of an art asset is closer to 6.5% instead of the widely quoted 10%. “The underlying cause of the overestimation of returns...is what is known as selection bias”, which does not account for unsold works. It is unclear how this number relates to the local market, but if it is true, art as an investment vehicle is no better than equities. While showing off and joining an invitation-only club are the social perks of buying art, the investment made is not for personal gain, but to cultivate free expression in this country that is swiftly losing its liberty. As Rahel Joseph also points out, acquire art “because you love it” and “don’t be in a hurry”. Not exactly sound investing advice, but always think twice before buying, because chances are, you will not be selling it for a significant return.

Huang Yao – Bridesmaid 伴娘 (1980), sold for RM 79,200 (est. RM 6-8,000) at Henry Butcher Art Auction Malaysia, Lot 61, 6 May 2012

“One of the reasons there’s so much talk about money is that it’s so much easier to talk about than the art,” – David Zwirner, art dealer and ArtReview’s 2013 second most powerful person in the art world
"Prices are so ridiculous that people go to galleries because they are obsessed by the money." – Francis Bacon, deceased Irish and artist that made the most expensive piece of art ever auctioned
“I think you can start off trying to invest in art but you will fall in love with it and end up being a collector, which will quite certainly make you a poorer person but it will definitely make your life richer.” – Bingley Sim Iskandar, prominent Malaysian art collector and investment banker

Ahmad Zakii Anwar – Balinese Girls (1994), sold for RM 55,000 at Henry Butcher Art Auction Malaysia, Lot 16, 21 April 2013; Renamed as Balinese Twins and sold for RM 66,000 at Masterpiece Fine Art Auction, Lot 173, 2 March 2014

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