【Feature - Profit】Seize Market Opportunities in Crises - Focus on Star Lots Bringing an Excess Rate of Return

Opportunities can only be seized by people who know how to seize them.

It seems that the beginning of 2020 was paused. Now the global economy is recovering slowly. There may be an opportunity behind the suspension. In the face of crises, some people feel depressed, but other ones can seize opportunities in crises. Which works of art are star lots bringing an excess rate of return? After the【Feature - Market】, we continue to explore how to seize opportunities in crises. High-return lots in a huge amount of works of art are like gold ore which has not been found but is immeasurable in price after being possessed.

Star Lots

Seizing opportunities in crises is a key to achieving a high investment return.

When the economy is optimistic, there will be a bull market where the premium cost is relatively high, when the economy suffers a downturn, both the seller and the market will be very prudent, and people who can seize the opportunity may become the winner in a crisis. Looking back at the financial crisis of 2008, the global art market could not escape from it. The average over-low/high-estimate rates were very low between 2008-2009. In such a case, the market liquidity is the tensest, most collectors are very prudent and rational, but relatively less competitiveness brings collectors a golden time for buying works, and collectors often have a bigger value-added space and safer margin for buying classical works.

2006-2013 Average over-low/high-estimate rates trend diagram

We will focus on some star lots bringing collectors an excess rate of return and explore their market performance after a crisis from the perspective of over-low/high-estimate rates and rate of return.

Focus on star lots bringing an excess rate of return

1.Zao Wou-Ki 28.4.75, 4 years 6 times,annualized rate of return of 60%

4 years 6 times,annualized rate of return of 60%

As a representative artist of contemporary artists, works of Zao Wou-Ki have always been the popular focus in auctions. And the " Zao Wou-ki Fever " in the auction field had shown some clues before the crisis. However, during the financial crisis in 2008, its market performance was affected inevitably, and his works' average over-low/high-estimate rates declined to the bottom. In such a case, people who dare to seize the opportunity may become a winner in this crisis.

In 2009, 28.4.75 of Zao Wou-Ki was auctioned in Ravenel. Its estimate price was USD 310,000 - 620,000, but eventually was sold for USD 280,000. When the market competition was weak, the collector could buy the artwork without paying a high premium.

In 2013, this lot was auctioned in Ravenel again. The estimate price was USD 780,000 - 1.55 million, but bidders competed fiercely. After 15 times of bidding, the turnover price reached USD 1.79 million, realizing an over-low-estimate rate of +99.67%. In four years, the turnover of the same lot increased by five times, achieving the annualized rate of return of 60%. It is a distinctive one among the artist’s artworks auctioned repeatedly, and the collector who bought it in the crisis successfully gained a high return within a short term.

duration of ownership of the same lot and its annualized rate of return

2.Liu Ye I Am A Soldier (Self portrait),11 years 14 times,annualized rate of return of 23%

11 years 14 times,annualized rate of return of 23%

Liu Ye’s unique expression full of childish interest is distinctive among Chinese contemporary artists. His artworks have always been the popular choice in auction field. From the perspective of over-low/high-estimate rates before and after the crisis, they were at the trough between 2008 and 2009, but it was also the best time for buying them. We take I Am a Solider as an example to recall how the collector seized the investment opportunity.

Created in 1999, this work is a classical self-portrait work of Liu Ye. The estimate price was USD 70,000 - 90,000 in the auction of 2008, and the turnover price was USD 97,750, realizing an over-low-estimate rate of +21.43%.

In 2019, this artwork was auctioned again. Its estimate price was USD 510,000 - 770,000, and was finally sold for USD 1.43 million, 11 years 14 times,annualized rate of return of 23%,ranking the second place among the artist’s artworks auctioned repeatedly. The over-low-estimate rate of this deal was +133.65%, far higher than that of +21.43% during the crisis 11 years ago. The surge of price suggests the importance of the right time.

duration of ownership of the same lot and its annualized rate of return

3.San Yu,11 years 9 times,annualized rate of return of 22%

11 years 9 times,annualized rate of return of 22%

San Yu has always been one of the most popular representatives among contemporary artists. His works’ over-low/high-estimate rates were very high before 2008 but suffered a fall during the financial crisis. This trend indicates that crises always bring collectors opportunities. We can take one representative work of San Yu as an example to illustrate the importance of seizing opportunities in crises.

Bottled Chrysanthemum on the Red Desk is a classical work in the black period of San Yu. In 2005, this artwork was auctioned at Christie’s Hong Kong. Its estimate price was USD 200,000 - 230,000, and the turnover was USD 532,000, realizing an over-low-estimate rate of +125.47%. At that time, the turnover of every square meter ranked only second to Four Naked Women, indicating that this work was very hot over ten years ago. During the 2008 financial crisis, this work was auctioned again. Its estimate price was USD 1.03 million - 1.29 million, and finally was sold for the low-estimate price, USD 1.03 million.

duration of ownership of the same lot and its annualized rate of return

11 years later, the Bottled Chrysanthemum on the Red Desk presented at Ravenel in Taipei. After fierce bidding, the turnover reached USD 9.7 million, up 9 times than that 11 years ago, its annualized rate of return was up to 23% (the highest annualized rate of return among San Yu's works), and this work was listed in the artist's most expensive works Top10.

4.Lin Fengmian Five Beauties,2 years 3 times,annualized rate of return of 79%

2 years 3 times,annualized rate of return of 79%

At the auction held by Hangzhou Seal In Time in 2009, Five Beauties of Lin Fengmian was auctioned. The work's estimate price was USD 520,000 - 740,000, and the turnover price was USD 850,000, realizing an over-low-estimate rate of +42.86%. Traditional Chinese painting of beautiful women is an important part of Lin Fengmian’s best period. The collector seized the opportunity in the crisis and bought this work with only USD 850,000. Five Beauties ranked among Top3 of Lin Fengmian's works sold in 2009.

duration of ownership of the same lot and its annualized rate of return

In 2011, this work was auctioned in Beijing Guardian. Its estimate price was USD 950,000 - 1.27 million, and the turnover price was USD 2.56 million, realizing an over-low-estimate rate of +133.33%. Over just two years, the lot had increased by three times from 850 thousand dollars, realizing an annualized rate of return of 79%. Five Beauties not only realized the transition from hundred-thousands of US dollars to millions of US dollars, ranking the personal most expensive work Top7, but also was far ahead in terms of the rate of return.

5. Zhu Yuanzhi Old Broadway In Winter,10 years 10 times,annualized rate of return of 28%

10 years 10 times,annualized rate of return of 28%

The influential degree and time of a crisis vary for different artists, but the same thing is that collectors should seize opportunities in the crisis and obtain precious lots with a low premium. Compared with artists introduced before, the 2008 financial crisis gave artist Zhu Yuanzhi more impacts. The over-low/high-estimate rates of Zhu Yuanzhi's artworks maintained low during 2008-2011 and till 2012 finally began to recover.

Old Broadway In Winter is a representative of the “Diamond-ism” of Zhu Yuanzhi . Its estimate price at auction in 2008 was USD 710,000 - 970,000, and the turnover price was USD 712,000. At the market trough, the collector bought this precious representative work without paying much high premium.

Ten years later, the work was auctioned at Christie’s with an estimate price of USD 3.82 million - 5.10 million, and finally was sold for USD 7.47 million, realizing an over-low-estimate rate of +55.17%, reaching an annualized rate of return of 28%. The turnover price increases 10 times. Bought with a price of USD 712,000, the collector seized a perfect market opportunity. This representative also became Zhu Yuanzhi's most expensive work Top2.

6.Pan Yuliang Nudes And Masks,10 years 6 times,annualized rate of return of 23%

10 years 6 times,annualized rate of return of 23%

From the second half of 2008 to the end of 2009, the market liquidity was the tensest, collectors tended to be prudent, the relatively less market competition was also obvious to the artists. Pan Yuliang was one of the most influential female painters and modern art educators in the 20th century. Due to impacts of the crisis, his works’ over-low/high-estimate rates remained low.

Her work Nudes and Masks was auctioned in 2009. Its estimate price was USD 80,000-100,000, and its turnover price was USD 240,000. Ten years later, this lot was auctioned at Christie’s again, with the estimate price of USD 770,000 - 900,000, and was sold for USD 1.52 million, realizing an over-low-estimate rate of +64%. 10 years 6 times,annualized rate of return of 23%,Over ten years, this work’s price had risen to USD 1.52 million from USD 240,000. Nudes and Masks successfully ranked among works worth millions of dollars as well as the artist’s most expensive work Top7.

Conclusion: The previous crisis and the current COVID-19 seem like a filter for the global art market. Only powerful galleries and auction houses can win by taking the challenges. As for the buyers, some collectors might wait and see or do not consider bidding, meanwhile some ambitious buyers will seize the opportunity to change a crisis into an opportunity. Where are the opportunities then? We will present you multi-dimensional market data in the next article [Feature - Big Data] Retrospect Ten Years of Ups and Downs of the Auction Field after the Crisis and See Presence and Exit of Artists in Vicissitudes. We hope that we can provide collectors with more information.




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