Friday, May 31, 2013, 10:34
Mainland stamp of approval
By Emma Dai

Mainland stamp of approval
Mainland stamp of approval
Mainland stamp of approval

Given the scene is Hong Kong, an aging society, and about stamp collecting, a conservative hobby, it may not be a surprise to see the venue so dominated by silvery heads — if not entirely white. At the philatelic auction held in a North Point hotel last month, everything went to order until attention turned to the key section — mainland stamps after 1949. Stillness in the hall was stirred by uproar from the back rows.

A dozen mainland buyers joked and bid against each other in stentorian fashion  with accents spanning the entire country. Within two hours, this small group of large ambition had consumed nearly all 230 lots, making bewildered onlookers wonder how deep their pockets were.

“I visit Hong Kong monthly for auctions,” says a man surnamed Zhang, a Beijing dealer on visit number twentysomething. “I come to do business as well as socialize with other dealers. They are from Shanghai, Guangzhou and other cities. Some of them are multimillionaires.”

The middle-aged dealer, beclad in a matte black Gucci jacket and sporting an of-the-moment Samsonite Red case, says he has no particular target or budget.“It all depends whether the price is good,” Zhang says. “Now the market is at the bottom. It’s cheap. In the middle of last year, I bought a Mei Lanfang miniature sheet for HK$280,000 ($36,069). Now it’s worth merely HK$150,000.”

“Hot speculation on mainland stamps after 1949 distorted the whole market from 2009 to 2011,” says Louis Mangin, director of Zurich Asia, the local auction house presiding over the weekend event. “Some of the post-49 issues soared 10 times to 30 times. Real collectors could no longer buy. Some even turned to the expensive rubbish because they thought it would go up 10 percent next month. That market crashed completely, down 50 percent from October 2011 to the summer of 2012. It has stabilized at a much lower position now.”

“Most mainlanders you see at auctions are speculators,” says Anna Lee, chairman of Phila China Ltd, a local auction house acquired by 347-year-old London-based collectables auction house Spink last year. “They treat stamps like stock, which I detest.”

Though high in price, targets for speculation are not rare, Mangin says, adding such items can always be bought in large number, have their price pushed up and be sold very fast — all factors checked by post-1949 Chinese stamps. “Cultural Revolution stamps are typical. They were issued in millions. You can buy as many as you want,” he says. “And so is the Mei Lanfang miniature sheet.” With a face value of 3 yuan (49 US cents), 20,000 copies featuring the Peking Opera master were issued in 1962. Yet it’s called the rarest post-49 miniature sheet. “It tapped HK$250,000 two years ago and now it’s HK$100,000. Back in 2003, it was only HK$10,000.”

If speculative items are something one can buy five in every auction, collector’s items may only appear once every five years. “The value of a stamp depends on rarity first. Then as any market, demand and supply is a big factor,” Mangin says. “Collectors’ items are not necessarily expensive. Some cost only HK$2,000. Historical interest plays a part. There are people collecting things related to specific events, i.e. the Boxer Rebellion. Some buy cancelations from every treaty port on specific issues. It’s highly specialized, not even rare.”

While speculators usually don’t bother with real collectors’ items, it can overlap. A few years ago giftmakers chased after early Qing Dynasty stamps — large dragon, small dragon and so-called red revenues. “If they want 10,000 sets, they would need 10,000 of these stamps. It stretched the demand,” Lee says. In 2008, a set of used large dragons was HK$2,000. But within a year it shot up to HK$10,000. “Because of that, people bought and hoarded. But prices dropped a year later and never reached that high again.”

While Zhang and other dealers are bidding on the next up-rise, Mangin sees the trend going the other way. “The post-49 stamps will continue to go down,” he says. “In terms of rarity, they are still overpriced even after the correction. Besides, when people lost fortunes in speculation, they stay away from it for a while. And many who thought it was easy money got burned last time. Some just disappeared.”

New collectors

While speculators are withdrawing, real collectors from the mainland are emerging unscratched after the market turmoil.

“We see more collectors from China coming,” says Mangin, whose auction house saw its share of mainland clients grow from 40 percent in 2008 to 80 percent today. “Out of our 4,000 clients, 200 participate systematically and the majority is from the mainland. They may only spend HK$2,000 a time, but they buy every time.”

Fat tail — that’s why clients from the mainland are important. And the way they buy shows they are new collectors. While seasoned collectors only set their hands on a small number of things they don’t have, new collectors tend to cast a wide net. “When people start, they want to enjoy a bit of everything. Then years go by, they find out what really interests them and get specialized.”

That net can be even wider if one’s exchequer is deep. At last month’s Zurich Asia auction, one new collector spent HK$2 million. “This man from Nanjing, capital city of Jiangsu province, was with us on the phone for two days non-stop,” says Mangin. “A typical new collector, he buys different bids across the full historical spectrum. Given that total transaction value of the auction is HK$19 million, he stands at the top of the pyramid.”

But purchasing power doesn’t build seasoned collectors. “If what you want is straight stamps as listed in a catalogue, all it takes is money. That’s not stamp collecting,” says Lee. “Collecting takes time to source to acquire. You do not turn into a stamp collector overnight.”

Historic value

“Stamps are not appealing in the same way as paintings or antiques. It’s the history involved that is more fascinating than the actual piece of paper,” Lee says. “The history of stamps is short — just some 170 years, but it’s a history we can relate to. That creates the interest. To learn all these things, one needs to read a lot.”

Lee says used postal items, not just mint stamps, are the real find for die-hard collectors. “Definitely a set of used and then a set of different post marks and postal history items — covers and postcards — things that actually went through the postal routes.”

If history is value, at least some of the mainland collectors are sophisticated enough to appreciate it. Over the years, postal history, old letters, and more specialized items are gaining attention.

“This is real collector’s material, a very rare item,” says Mangin about lot No 320, a strip of five dull green stamps with duo-dragon pattern tied by a large “SHANGHAI” seal chop in black. Officially called Empress Dowager Commemorative issue, the 9-cent stamps were first printed in 1894 to celebrate the 60th birthday of Empress Dowager Cixi, the most powerful woman in China at that time. Estimated at HK$120,000 to HK$150,000, the issue finally sold at HK$483,000. “The person who purchased this is one of the very wealthy collectors — a Shanghai property developer. He called in to bid,” discloses Mangin. “He is only in his 40’s — a very young collector. As far as I know, he hasn’t yet sold anything. This piece may stay in his collection for one decade or two.”

Another surprise comes from an old envelope — so crumpled it constitutes trash to an inexperienced eye. But if one knows where to look, one would notice this piece, sent out in 1941 from Chongqing to London, had been stuck in Hong Kong for four years before arriving, a result of World War II. “It looks cheap,” says Mangin. “We started at HK$600, but fetched HK$29,900.” Again a phone bidder from the mainland got it. “Definitely a collector, somebody who understands the history, very specialized.”

There is a saying that whatever Chinese buy, they buy the price up. Given the size of its economy and population, that should bear some reason to all commodities, including stamps.

“Stamp collecting is a Caucasian hobby,” says Lee. “In the past, Chinese were too poor to collect. All materials were in the West. Now it has changed. It’s difficult for Westerners to compete with the Chinese. As a collector, of course one wants stamps of one’s own country. A lot of materials are coming home.” “For the auction business, Hong Kong is the best place to be,” says Mangin. “It’s a free trade hub with neither import or export duties, nor VAT (value-added tax). Whereas the Chinese mainland and Taiwan cast heavy duties — 4 percent and 5 percent respectively, it’s a nominal 0.5 percent here — barely noticeable. Beyond that, legally any collector’s material cannot leave the mainland. Demands come across the border and surface here.”

That probably leads to competition. In the auction world, what matters to buyers are good lots and to sellers are good prices. While only one public auction house in town presented stamps three decades ago, now there are at least six.“The more the merrier,” as Lee puts it. “Come by all means. Then we become the capital.”

Momentum investment

Stamps may not be a conventional asset class when it comes to investment, but the  China 200 Rare Stamp Index (below) run by historic London-based philatelic dealer Stanley Gibbons is worth making portfolio room for. The index tracks the prices of 200 rare investment-grade Chinese stamps and shows subtantial growth from 1989 to 2012. The value of the stamps has grown by £4 million ($6 million) in 23 years, a compound annual growth rate of 11.6 percent. The chart below shows the index bests Shanghai, Singapore and Hong Kong stock market returns over the same period, outshines gold, and even tops the investment performance of Hong Kong’s property market.

The increasing desire by the Chinese to own their rarest heritage pieces, coupled with the growing number of Chinese collectors, has seen world records for prices realized at auction being broken on a regular basis. The world record for a Chinese stamp at auction is currently shared at HK$8,970,000 by two issues: a corner block of four ‘1968 Mao’s inscription to Japanese Worker Friends’  sold to a Hong Kong collector in February 2011, and another Cultural Revolution stamp ‘The Whole Country is Red’ sold at a China Guardian auction in Beijing in May 2012.

For Chinese stamp aficionados — or any passionate collectors with a penchant for niche exclusivity — the ultimate silver bullet of Oriental philately is the so-called Red Revenue Small One Dollar stamp (above). With only 30 or so remaining — and almost all unused and still gummed — the ‘RR’ has a provenance not unlike the UK’s Penny Black. It is not the mainland’s most expensive stamp, but is its most venerated and iconic. One was auctioned for HK$2.59 million in 2009, and another for HK$3.9 million in 2010.  The mainland’s stamp revolution is underway and is gathering momentum. 

Mainland stamp of approval
Mainland stamp of approval