Tangible assets have continued to prove their worth as investments throughout 2010 and early 2011, partly due to the impetus provided by Asian, especially Chinese, buyers.

This shows through clearly in the markets for art, wine, stamps and rare coins.

Fine art  

The art market, after a bounce in 2009 from the sharp decline in the previous year, started 2010 in a downbeat mood. Prices appeared to have declined modestly before picking up in August and September and finishing the year strongly. While on a like-for-like basis prices are still significantly below levels seen at the peak in late 2007, annualised returns for art over the past decade are in the region of 5.8 per cent, according to the Mei-Moses World All Art index.

Despite the mixed backdrop, however, auction turnover is up and some new records have been set, notably for Picasso, Giacometti, Modigliani and Matisse. However, well-known contemporary artists, though selling satisfactorily, are still fetching prices well below the best levels of a few years ago. 

The big story in the art market, as elsewhere in the collectibles arena, is the emergence of Chinese buyers, auction houses and artists as major factors in the market. In terms of auction results in 2010, for example, Chinese artists occupied four places in the top 10, along with more familiar Western names. Seven of the top 10 auction houses by turnover are now Chinese, while Beijing ranks second behind New York in terms of turnover. These trends can only continue. 

The indications are that more modestly priced art, such as Old Master drawings and photography, is still holding its price well. In the case of the latter, the older 19th century items are doing best, along with classic names such as Man Ray, Henri Cartier-Bresson and Robert Mapplethorpe. 

Just how lucrative photography can be, when it is bought at the right price, was demonstrated at a recent Sotheby’s sale, when US artist Cindy Sherman’s Untitled #87 sold to a New York dealer for $927,000. The work last changed hands at auction in November 1986, when it fetched just $4,600.

Vintage wine

The market for investment-grade wine has remained very strong. The Liv-ex Fine Wine Investables index has continued to grow strongly, rising by around 20 per cent in 2010 and gaining 3.1 per cent in March 2011 alone. Since the start of 1998, the index has risen almost fourfold and has generated an annualised return of close to 7 per cent a year over the past decade. Liv-Ex’s Claret Chip index rose strongly during 2010, but has flattened out of late.

Some experts among specialist wine investors attribute this to the heavy weighting of Château Lafite in such indices. Lafite prices were driven to exaggerated levels by Asian buyers last year but have since paused for breath, while the slack has been taken up by Haut-Brion and Mouton Rothschild, which rose by 9 per cent in January 2011 alone, according to one report. This perhaps provides some evidence that Asian buyers are developing more sophisticated tastes and an appreciation of other equally high-quality marques.

The auction market has reflected this trend. The world’s largest wine auctioneer – Acker Merrall & Condit – has seen sales levels at its Hong Kong auctions outstrip those in New York by a factor of two to one. The growth in Chinese demand for wine kicked off in 2008 when Hong Kong abolished hefty import duties. The strength of the renmimbi against sterling and the dollar has also played its part in underpinning prices.

The recent acquisition of a minor 20-hectare Bordeaux property (Château de Viaud) by Cofco, a Chinese state entity, as part of a strategy to develop a Bordeaux-branded wine specifically for the Chinese market, is a clear indication that China intends to become more involved in Bordeaux winemaking. Observers might speculate that this can only boost demand for top-grade clarets still further.

Interest is likely to be reinforced by the fact that the 2010 vintage is expected to be excellent, according to en primeur tastings. A good new vintage generally also increases interest in the better vintages of previous years.

Some revival in demand from US buyers is being reported, although exchange rate influences militate against this. ‘Although the centre of gravity of the world fine wine market may be shifting slightly back towards Europe and North America, Asia – and particularly the new wealthy classes in China – remains the key driving force,’ says Andrew della Casa of The Wine Investment Fund.

Informed observers are still looking east rather than west. And that’s as true in the art, stamps and coins markets as it is in wine.

Quality coins

In the rare coin market, prices have remained buoyant, helped by a psychological boost from rising metal prices. Philip Skingley, editor of the Spink Coins of England annual, the benchmark for numismatic prices, observed in his foreword to the 2011 edition of the catalogue that the upward trend in prices in 2010 was virtually identical to the 15 per cent gain seen in the previous year. Some observers put the gain in pieces typically bought by investors at closer to 12 per cent. 

Skingley says: ‘The general trend is for buyers to seek out quality over rarity and pay surprisingly high prices for relatively common coins in high grades over a scarcer coin in a lower grade, and the gap in prices between coins in very fine condition and extremely fine condition is therefore widening.’ This demand for high-quality coins, especially high-quality rarities, is underscored by other leading dealers.

The overseas appetite for numismatic rarities is apparent from auction results. Baldwin’s marathon 14-hour Hong Kong auction held in early April produced a result well over double pre-sale estimates, which, according to managing director Ian Goldbart, ‘validates the continued strength of the collectibles market in which we operate’. 

According to Goldbart, demand is very strong for rarities, where certain high-
net-worth individuals want to be ‘seen’ as the buyer – at any price.

This is borne out elsewhere. The 15 per cent gain in the English coin market noted by Spink conceals some wide variations. The prices of some of the more iconic pieces have risen sharply at auction to levels as much as 40 per cent higher than in the previous year. Gold coins appear to have done best during the past year, with copper and bronze also doing well. 

Since 1996, a representative sample of gold coins is estimated to have delivered a total return of 330 per cent, silver coins a gain of 353 per cent, and copper and bronze a rise of 457 per cent. The average annual compound gain in the sample since 1996 has been 10.5 per cent.

Rare stamps

The price of rare stamps has continued to rise. The Stanley Gibbons GB Rarities 30 index (which is based on published catalogue prices) increased by 7 per cent in 2010 and is now showing a meaty cumulative increase of 275 per cent since 1998. 

Investment-grade Commonwealth rarities have increased in price by a total of 169 per cent since 1998. This year’s price gains have been broadly on a par with the historical average annual gains seen in recent years. A slower rate of increase was seen in 2009, after a sizeable boost in 2008, but strong growth has resumed.

As in the art market, the Asian influence is increasing. In 2010, the world record price for a Chinese stamp was broken at least three times, while record prices have been paid for Indian stamps in the past few months.

Gibbons is clearly of the view that the market for collectibles of all types will shift towards Asia in the next five to 10 years. The firm recently started offering rare Chinese stamps to collectors and investors and is considering establishing an office in Hong Kong to service Chinese stamp investors. Philately is a well-established activity in China, which reputedly has some 50 million collectors, compared with around 30 million in the rest of the world, so the potential is obvious.

Dealing in Chinese stamps is a major strategic move for the firm.