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Asian art turns from plaything of Hong Kong's young rich into moneyspinner

Demand for high-end Chinese art booms as the growing number of millionaires seek alternative investments

In a luxury apartment perched on the leafy hills of Hong Kong, Kai-Yin Lo browses through a trove of Chinese art acquired over several decades, reflecting how her niche, scholarly pursuit has hit the mainstream.

Despite giddy Chinese art prices showing some strain from global economic uncertainty, collectors like Lo think values will continue to rise due to limited supply and continued strong demand as Asian collectors become more affluent.

"As east and west get into more of a confluence in taste and in the market place, it will still go up," said Lo, a Cambridge-educated writer and jewellery designer known for wearing mismatched designer shoes.

Lo is one of Hong Kong's leading art collectors, her home stacked with rare Chinese furniture, stone carvings and paintings, including an inkbrush panorama of the Grand Canyon by 20th-century Chinese master Wu Guanzhong.

Hong Kong's auction market turnover trebled between 2009 and 2010. The Mei Moses Global Art Index – a broader measure – showed an 11.8% rise in the first 11 months of 2011, statistics belying the global fiscal crisis.

Despite the art market's vulnerability to shocks, including the collapse of Lehman Brothers in 2008, when unrealistic estimates left scores of unsold lots amid tepid bidding even in the red-hot Chinese ceramics market, Asia's rapid wealth accumulation is likely to result in more cash flowing into art and other alternative investments.

Asia's wealth management and private banking industry remains a growth area for banks, with an estimated 3.3 million high net worth individuals worth more than $1m, according to Capgemini and Merrill Lynch's latest annual World Wealth report.

With a combined wealth of $10.7tn (£6.88tn), Asia's wealthy have eclipsed the $10.2tn held by Europe's generational millionaires. "The exponential growth in the number of emerging market [millionaires] ... is expanding the global market for investments of passion," the report said.

"It may not be a good time for sellers but it's an excellent time for buyers. During late 2008 and 2009, I highly advised clients to buy," said Bobby Mohseni of art consultancy MFA Asia. "With Chinese contemporary art, some prices have gone exceptionally high and that's just over a decade ... so it's best to look at upcoming or mid-tier artists."

While stocks on the S&P 500 in New York have outperformed western art over the past 25 years, according to Mei Moses data, Chinese and Asian art is still comparatively cheap compared with the Impressionists or American contemporary art. A Mei Moses index for traditional Chinese art showed a 24% jump in the first threequarters of this year.

"Confidence in the Chinese contemporary art market remains high despite art market confidence dropping sharply in the US and European contemporary market," said Anders Petterson, head of art research consultancy ArtTactic.

Even for those with less purchasing muscle, experts say bargains can still be had, including modern Filipino and Indonesian painters, as well as photography and Chinese snuff bottles, to name a few categories.

"Collect what other people aren't collecting," said Tony Miller, a former top Hong Kong government official who collects Chinese art. "If you can't afford Qi Baishi paintings, and they're going at HK$2m a throw, well, go for prints."

Qi is one of the masters of inkbrush paintings and his pieces routinely sell for millions of dollars.

Owners of Hong Kong's art galleries, many of them crammed along the winding Hollywood Road in the Central district, say timing is key.

"If you get good works of art, then without any question it is a safe haven, but it doesn't have the liquidity. That's the difficulty," said Sundaram Tagore, whose galleries in Hong Kong and the US feature a stable of culture-bridging artists.

"If you're trying to sell at the wrong time it becomes part of the distressed market, but if you're selling at the right time then you could make 100 times more, maybe more than property or any bonds can provide you."

The search by Asian investors for alternative assets has extended beyond art into wine, gems, watches, postage stamps and other memorabilia – the rarer and more exclusive, the better.

With about two-thirds of the world's stamp collectors in Asia, the stamps and collectibles market has surged, says Geoff Anandappa of stamp and memorabilia retailer Stanley Gibbons.

Hong Kong-based InterAsia Auctions – which specialises in Asian stamps – broke world records for Chinese stamps in September, taking $12.6m over four days. A 1941 Dr Sun Yat-Sen inverted centre stamp fetched $221,000, up 66% from a similar sale a year ago.

Chinese and Asian buyers have cornered the fine wine market, with a Hong Kong Acker Merrall & Condit wine auction in December bringing in $9m, including a single super-lot of 55 Romanee Conti vintages that fetched a record $813,000.

Similarly, Asian buying is behind the boom for diamonds and gems. China is on course to become the world's top diamond buyer and retailers in Hong Kong report a rise in the number of men coming to buy loose diamonds for investments.

A Hong Kong jewellery retailer recently raised $2bn in one of the city's biggest initial public offerings this year to fund expansion in the region.

"It's not the old days of 'safe as houses', put your money in the bank and that will sort you out," said Jon Reade of the Art Futures Group, a Hong Kong-based art investment firm. "Those are the days probably of my parents' generation … people are getting more creative with their money." © 2011 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds

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