Painting by numbers? China art trading house promises investors sound platform

Nft

19/02/2016 10:21

* HK's Takung Art says revenue, profit, valuations surging 
    * Platform offers trade in units of jointly owned artwork 
    * Contemporary Chinese pieces traded for 10 yrs before sale 
    * Investor-enthusiasts see safe-haven opportunity 
    * As China art market cools, sceptics say Takung model risky 
 
    By Farah Master 
    HONG KONG, Feb 19 (Reuters) - As China's economy wheezes to 
a 25-year low, investors who once collected stocks and property 
are turning to what they are willing to believe will become a 
new safe haven market - a trading platform for fine art. 
    Even as the global fever among connoisseurs cools for 
Chinese art, Hong Kong-based Takung Art Co  TKAT.PK  said its 
revenue and profit jumped along with rampant growth in 
valuations for a portfolio of paintings, jewelry and precious 
gems. Via Takungs's platform, investor-enthusiasts can partly 
own, buy and sell Chinese art pieces over a 10-year period.  
    Earlier this week, the small U.S.-listed firm said thousands 
of customers like Shenzhen-based finance professional Zhou are 
boosting trading of units in artwork listed on its platform. 
Takung said the notional value of its portfolio of contemporary 
pieces has surged over 700 percent to $179 million since it 
launched the platform at the end of 2013.  
   "We all want an easy, safe place to earn money," said Zhou, 
37, who declined to give his full name. Formerly a stock 
investor, Zhou said he researches art trends personally and 
currently has around 400,000 yuan ($61,360) tied up in Takung's 
platform: "Here I know my assets are safe, and for a long time." 
    Online art marketplaces have proliferated as the Internet 
has grown, with sites from Beijing's Hihey.com to New York-based 
Artspace offering art lovers an alternative to traditional 
auction houses. Giants of e-commerce are also in on the act -  
Amazon.com Inc  AMZN.O  operates Amazon Art, featuring $200,000 
oil paintings.  
    But traditional art auction houses such as Sotheby's  BID.N  
and Christie's International have seen overall sales slow of 
late amid global economic uncertainty. By 2014 the global 
auction market for Chinese art and antiques had slid to $7.9 
billion, nearly a third below its 2011 peak, according to a 
joint survey by online auction platform Artnet and the Chinese 
Association of Auctioneers.  
    Philip Hoffman, chief executive of the Fine Art Fund Group 
in London, said he would be very surprised if Takung's model was 
translated outside China as the mode of investing was risky.  
    "A lot of these people (using the online platform) simply 
have the financial approach with no art understanding 
whatsoever," said Hoffman, whose fund manages $350-500 million 
in art assets. 
     
    ART FOR HK$1 PER UNIT 
    Takung's model is a first for Hong Kong. The brainchild of 
40-year-old Chairman and Chief Executive Di Xiao, Takung neither 
buys nor sells art on its own account, but charges a percentage 
fee for owners to list works that will be traded on the platform 
for a guaranteed 10 years, as well as trading commissions.  
    The art's price tag is then broken down into a large number 
of small 'units' - for example, a painting valued at HK$1.2 
million may be divided into 1.2 million units at HK$1 apiece. 
Platform users then trade units, the price changing according to 
demand - and so far, every work on the platform has appreciated 
in their notional on-screen value, often by huge multiples. 
    This week Takung reported revenue more than doubled to $11.3 
million and net profit nearly quadrupled to $5.4 million. "We 
believe that our sharp increases in revenue and profitability 
validate the soundness of our shared fine art ownership model," 
Di Xiao said in a statement. 
    After trading on the platform for 10 years, Takung said 
works will be sold "in any way available at the time, including 
auction house, galleries and/or a 1-to-1 transaction platform 
that we are developing".  
    The first such sale is due in December 2023, with proceeds 
to be distributed among the shared ownership. Asked what might 
happen if the art fetched less than its on-platform valuation, 
Takung said, "As a product approaches the end of the 10-year 
period, the on-platform valuation will converge to the expected 
valuation of selling the piece as a whole." 
 
($1 = 6.5188 Chinese yuan renminbi) 
 
 (Editing by Kenneth Maxwell) 
 ((farah.master@thomsonreuters.com; +852 28431631 , +852 9631 
8262; Reuters Messaging: 
farah.master.thomsonreuters@thomsonreuters.net)) 
 
Keywords: CHINA INVEST/ART