COVID shutdowns cancelled physical art auctions and exhibitions through 2019, forcing auction houses online — rebounding the global art market. In 2020, Hong Kong ranked second in art sales globally, behind New York. The NFT craze delights artists, dazes experts, and adds a younger clientele to art auctions. Wang Yuke reports from Hong Kong.
Hong Kong overtook London in 2020 to be the world’s second largest contemporary art auction market after New York, even though the COVID shutdowns cancelled physical Art Basel Hong Kong and the Hong Kong Arts Festival.
The global sales of art and antiques contracted by 22 percent from 2019 and public auction sales declined by 30 percent, according to the Art Basel and UBS Global Art Market report published in March 2021. But Hong Kong bucked that downward trend.
In the first eight months of 2020, Hong Kong’s global art market share rose to 26 percent, from 20 percent for the full 2019, recording $314.6 million in auction sales, beating London’s $303.5 million, according to ArtTactic, an art market data analysis company. The three major art auction houses in Hong Kong, Christie’s, Sotheby’s and Phillips, all realized a bumper year, with Asian buyers accounting for a third of all bids by value, in global sales.
Christie’s projected $7.1 billion total sales in 2021, a 54 percent rise from 2020 and the highest in five years. Its auction sales in Hong Kong reached $1.03 billion for 2021, with a record season in the fall.
Phillips saw a 32 percent increase in global sales for 2021, from 2019. Hong Kong contributed significantly to Phillips’ record auction sales with $269.8 million, nearly double that of 2020.
Sotheby’s Asian auction sales for 2021 reached a record high, at over $1.1 billion, with 90 percent sell-through rate in both auction and private sales.
Magnet for collectors
The city is steeped in the trading of Chinese antiques and fine art, from the last century. Its Chinese antiques trading reputation has made it a magnet for international collectors and dealers. Local auction sales “see a balance of Eastern and Western art collectors”, says Francis Belin, Christie’s Asia-Pacific president.
Christie’s confidence in the Hong Kong art market prompted it to hold public education programs and landmark shows in Hong Kong during the pandemic, which brought a host of collectors, said Belin. The Basquiat Show held in May afforded the public a rare exposure to the late graffiti pioneer artist Jean-Michel Basquiat’s oeuvre.
Hong Kong is the “Southern Gate” to the entire Chinese market and the only city in China that operates under a common law legal system familiar to most international investors. It is the perfect catalyst and value-adding facilitator between buyers and sellers at home and abroad, says Nicholas Chan, partner at Squire Patton Boggs Hong Kong, a leading global law firm.
There is considerable trust in the city’s well-established contractual, private property, and copyright laws. All the stakeholders in art sales secure trust and transparency in transactions, notes Chan. “We have strong data privacy laws, Global 100 law firms operate in Hong Kong, and top lawyers reside here.”
Hong Kong boasts a healthy art milieu, buttressed by blue-chip global galleries, sophisticated wealthy collectors, and seminal global art fairs, such as Art Basel, says art advisor Jehan Chu. Cultural institutions like the M+ Museum, Hong Kong Art Museum, Asia Art Archive, and Parasite Art Space, nurture its art environment. “Hong Kong has all the supporting legs of the stool,” says Chu.
“Its strategic location makes it easily accessible for clients from the APAC region and beyond; and the city’s proximity to Chinese mainland increases its accessibility to the expanding Chinese economy and rising number of collectors,” observes Nathan Drahi, managing director of Sotheby’s Asia.
Jonathan Crockett, Asia chairman of Phillips, says that as traditional investment in financial markets is highly uncertain, ultra-high net worth individuals, or UHNWI, with over $30 million in assets, are diversifying their portfolios. The appreciation potential of art appeals to them. There were 5,042 UHNWI in the city in 2020, a 13 percent increase over 2019, according to real-estate consultancy Knight Frank’s 2021 report.
The COVID-induced travel restrictions and social distancing forced art sales online. Global online sales of art and antiques in 2020 doubled the 2019 figures, accounting for a record 25 percent share of market value, according to the Art Basel and UBS Global Art Market report.
For Phillips, online sales in 2021 soared 417 percent above 2019 levels and by 68 percent over 2020 levels, with half of the lots being sold via live auctions. The pandemic has accelerated the process and will have far-reaching impact on the art market, with “more online activities happening”, says Crockett.
But physical auctions won’t go obsolete, because bidding online doesn’t allow people to “read the room,” notes Crockett, “where the dynamism, and bidder-bidder and bidder-auctioneer interactions are vital stimulants”.
The NFT cult which began in 2014 as non-fungible tokens, fermented serious interest in recent years after over-the-roof prices for NFT artworks by artists like Beeple (Mike Winkelmann), Mad Dog Jones, and Kevin McCoy. NFT digital collectibles, such as drawings, images, videos, music, films, and games, use blockchain technology as authentication for a unique digital signature permanently attached to the work. That creates scarcity which fuels collector and investor momentum.
Christie’s first ever NFT auction in Hong Kong last year helped the auction house shatter the $100 million ceiling in its NFT sales worldwide. “NFT has brought a new ecosystem of creators and collectors into fine art and collectibles. While it represents a different aesthetic and medium, NFT demands the same level of interest and commitment at the collecting level,” says Drahi of Sotheby’s Asia.
It unlocks a new world for creatives to play with artistic possibilities to compose NFT artworks, by transplanting digital content onto traditional artworks, or giving it a virtual reality or augmented reality twist, on metaverse, says Johnny Hon, founder of the Global Group of Companies. Metaverse is the next Web 3.0 evolution.
NFT is a proof of ownership that cannot be copied, and the rules for changing the ownership are embedded in the computer program, which ensures that “each time the NFT changes hands, the artist will have to get paid. The coin won’t be released unless that condition is fulfilled,” Hon says of the financial security that NFTs promise creators.
NFTs unlock a new venue for Hong Kong artists to increase their reach and visibility, reckons Chu. It’s a boon particularly to homegrown budding artists to bypass galleries, and go directly to the public and collectors. Many local artists have made their first NFT foray, Chu says, and “in some cases, it’s the most expensive piece these artists have ever sold”.
Crockett says 90 percent of NFT collectors are new to Phillips and they are not only active in the NFT domain, but have started investing across categories. “It’s no secret that some great ‘Crypto Whales’ are interested in NFTs,” he says.
“Crypto Whales” are entities, individuals, or Exchanges, holding significant percentages of a cryptocurrency, to engineer a fall in value, or buying frenzy, by triggering the herd stampede of small investors. They thereby acquire massive additional holdings cheap, or lock-in significant profits. In the Bitcoin world, Whales typically hold 1,000 Bitcoins or more.
Youth grasp NFT
The majority of NFT bidders or buyers at auction houses are newcomers to the brands. For Christie’s, 74 percent of NFT buyers were newcomers. Sotheby’s 78 percent of NFT bidders were new clients, more than half below age 40.
“It’s the entry point to invest in not only digital art, but also traditional contemporary art,” notes Chu. Buying an NFT is a much easier and less intimidating alternative, to bidding at auction houses, or buying in galleries. NFTs normalize art collecting and investment. Crypto-art sweeps the youth, especially the millennials, as these digital nomads are already used to buying art on social media, Chu observes.
Guillaume Cerutti, CEO of Christie’s adds that the boom in NFTs piques the interest of traditional collectors who are becoming aware that physical art and digital art are overlapping.
“It demonstrates how NFTs and digital art are permeating the pre-existing market as a growing movement with real staying power,” concedes Drahi from Sotheby’s Asia.
In Hong Kong and other Asian regions, where a storage room is a luxury with humidity risk all year round, NFTs offer a sweet spot for art collection — you own it, but don’t have to rent a space for it, or worry about deterioration in storage.
Drahi identifies two major trends driving the Asian preference: First, demand for Western art by collectors in the region remains strong and keeps growing, as reflected by the $334 million record sales of Western art in 2021. Second, there’s been rigorous demand for contemporary art by young Asian artists too.
Among the most favored genres of fine art across Asian collectors is contemporary art, Chu figures, because the themes and ideas are relatable. “Since Sotheby’s began offering Western art in Hong Kong five years ago, the art market has quickly evolved, and the shift in taste is largely driven by the influx of a new generation of collectors,” he says.
While artworks by old masters are returning to the spotlight gradually, Chu regrets that they remain overlooked and under-appreciated. NFTs as a digital medium embraced by young collectors, can help reintroduce and reinvigorate the interest in Renaissance and medieval art, believes Chu.
Digital copyright risk
NFTs cannot be a significant factor in the art market if laws and regulations to safeguard creators’ intellectual property lag. Katarina Feder, vice president of the Artists Rights Society says that “although we have become increasingly adept at monitoring the digital landscape, by confronting illicit use of copyrighted images by issuing take-downs or retroactive licenses, it’s still impossible for any person or entity to police all infringements”.
Therefore, the Society is resorting to community-based solutions, “through a system of stakes and rewards — the collective is incentivized to monitor and report infringements”. The Society is also educating the creators on what copyright is, and how to protect ownership.
It is a challenge to find the missing pieces of the NFT puzzle and put them together. With 40 years’ experience in the art industry, Fabio Rossi, co-president of Hong Kong Art Gallery Association detects a dichotomy of collectors — those buying art as a financial investment, and those treating art as cultural value.
The former invests largely for monetary reasons, while the latter treat art collection as an exploration of humanity, cultures, personal growth, and connectedness of the past, present and future. “The two groups both grow, like two parallel universes,” notes Rossi.
Art lovers in Hong Kong are well catered to by local galleries engaging the public. Artspace K, established in 2020, holds at least one monthly event, of lectures, workshops, and performances. Most are free. “By joining the event, the public develops a deeper understanding of the exhibits, stimulating their love for art,” says Liz Pong, communications and development manager at Artspace K .
Rossi finds some collectors’ fixation on the monetary aspect of art frustrating because “they are missing the intrinsic value of art, which is the connection with the artists, curators, and themselves”. If there are more art academies, and more support from government for local artists, there will be more meaningful dialogue on art — not just from a financial viewpoint, asserts Rossi.
Although Hong Kong has dedicated ample resources for the public to appreciate art, Chu argues that art education should start from the formative years — that art education be included in the compulsory school curriculum.
Belin of Christie’s says it will continue engaging audiences digitally, through optimized virtual presentation of art lots and hybrid sale formats. He is positive about the Asian market, particularly driven by the Chinese mainland’s affluence and youth.
• Make art a compulsory subject from elementary school onwards
• Fund more art exhibitions and performances for public enjoyment
• Introduce art appreciation documentaries on social media
• Establish a task force to grow a healthy NFT ecosystem
Contact the writer at email@example.com
HONG KONG NEWS