Daily Archives: May 21, 2009

Chinese High-End Consumers Reluctant To “Trade Down”

Those With A Taste For Luxury Goods In Emerging Markets Less Willing To Cut Back, HK Study Finds

While China has not remained unscathed by the global economic crisis, its luxury consumer market shows resilience in consumer confidence and willingness to shell out

While China has not remained unscathed by the global economic crisis, its luxury consumer market shows resilience in consumer confidence and willingness to shell out

One of the more surprising features of the global economic downturn, to some commentators, has been the relative health of the Asian consumer market throughout the crisis. Although developed markets like Japan and Korea have certainly been hit hard — as their high-tech and automotive export markets have declined substantially — emerging markets like Greater China and, to a lesser extent, India, where income gaps are still quite large and wealthy consumers have developed a taste for luxury goods are doing comparatively well.

This is not to say China hasn’t been hit by the slowdown — it has, as low-tech manufacturers and mass producers have, in many parts of the country, been forced to shut down or lay off thousands of workers. However, we are seeing that the specific class of Chinese luxury consumer is continuing to spend through the global recession, perhaps as a sort of badge of wealth, perhaps because these consumers just want to keep buying. There are plenty of theories why Chinese luxury consumers, unlike those in Japan and North America, aren’t waiting to buy their next handbag or car — however, one Hong Kong study in particular caught my eye:

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Art Is Good As Gold In Inflation Era — Bloomberg

Fund Managers Moving Towards Art As Investment Diversifier, Will These Managers Balance Their Art Portfolio Investments With A Global Mix?

Castlestone is investing in western artists like De Kooning. By focusing only on western art, is the fund going to miss out on higher returns later?

Castlestone is investing in western artists like De Kooning. By focusing only on western art, is the fund going to miss out on higher returns later?

We have written before on Castlestone Management, a $660 million investment fund that focuses on works of art, which the fund feels is a better investment over the long term than traditional hedges like gold or other hard assets. Today, Bloomberg has an excellent profile of the fund, noting that it is designed to benefit from one of art’s great features — a resistance to the great asset de-valuer: inflation. Castlestone, and art investment funds like it are , Farah Nayeri writes, “designed as an anti-inflation shelter at a time when recession-busting stimulus packages are flooding the global economy with cash.” So with the number of these funds increasing, as investors look for inflation-defying destinations for their money, will they get with the program and look for a more global mix, made up of Chinese, Indian, and other emerging artists? Or will they stick to their Picassos and Warhols?

It looks like Castlestone may be up for anything as time goes on, but at the moment they seem to be a bit top-heavy with artists who are late in their career. However, with this sort of fund growing and becoming more popular with inflation-weary investors who aren’t up for the rollercoaster ride of investing in gold, stocks, or jewels, an art fund might be just the thing.

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