Buying Trends Indicate Wealthy Chinese Looking For Long-Term Value, Asset Classes That Outpace Inflation
JCK looks back at the recent Sotheby’s jewelry auction that took place in Hong Kong, reflecting that the runaway success of luxury goods classes like jewelry/diamonds at that auction shows that Chinese buyers — who were the overwhelming majority in this instance — are continuing to invest in assets that will hold sustainable value. Seeing how these same buyers were more interested in diamonds than Chinese jadeite — which does not have as sophisticated resale markets — it seems pretty obvious that wealthy Mainland Chinese are supplanting the historical role of Hong Kong Chinese as mass buyers of luxury asset classes. This carries over in all classes, recently, from fine wines and watches to automobiles and contemporary Chinese artwork.
The sale was dominated by Asian private buyers who saw “an opportunity to acquire top-quality stones at prices not seen in the last year or so,” said Quek Chin Yeow, deputy chairman and head of Jewellery Department, Sotheby’s Asia. “The white diamond market was particularly robust for stones from 15 to 5 carats, with multiple bids on many lots.”
The auction took in just over $16 million. A total of 67.6 percent of the offerings were sold by lot and 50.9 percent sold by value.
I think this auction is the final word on what we’re going to continue seeing Chinese investors and wealthy individuals buying in coming years — rather than sinking money into stocks, they’re going to look for more hedges. This is as much a rational decision as a cultural one. Gold has traditionally been the area where Chinese have invested — maybe not from 1949-1979, but definitely before that and since then. It is common for families to give 24k gold sculptures or jewelry to young couples or as a gift to a new mother, as this is and most likely will always be the major hedge for Chinese — it’s attractive, portable, somewhat affordable, and stylish. However, gold markets are vulnerable to stock and currency market shifts, arguably much more so than luxury asset classes like fine wines, diamonds, and top-quality artwork. That’s why we’re seeing so many of these super-wealthy Chinese moving into these assets: because gold is both too vulnerable to broader markets and thus too risky as a long-term hedge and it’s too common as a traditional asset. The very wealthy in China want to diversify, as most do around the world.
Auction houses in the region have caught on to this trend, and are making the Asia-Pacific/China region a major priority in their long-term strategy, in both contemporary art & antiques and jewelry/wine/automobiles. As wealthy Mainland Chinese continue to buy more of all of these asset classes as hedges to outrace inflation and keep growing their value, I think we’ll see the frequency of art/luxury auctions increase in Hong Kong and Mainland China for quite some time.