Tuesday, 16 April 2013

Snapping Up Passion Investments

This playful panther with a large sapphire is one of many pieces in demand
Now that nouveau riche mainlanders have their apartments and cars, the next items to purchase are fine art, wine, watches and jewellery.

According to a report by the Hurun Research Institute and Industrial Bank, 56 percent of mainland millionaires in US dollar terms are parking their wealth in so-called passion investments.

"The understanding of fortune has changed dramatically in the past decade," said Rupert Hoogewerf, chairman and chief researcher of the institute. "The rich Chinese are now taking a global view in dealing with their fortunes and assets."

The report said the number of millionaires in China has increased 4 percent last year to 2.8 million, growing at the slowest pace in four years because of the economic slowdown and increasing concentration of wealth.

Based on a survey of 1,219 mainland millionaires, the report said 76 percent invested in properties, while 65 percent in stocks. Both these percentages are the lowest in four years.

Previously mainland millionaires invested in property to combat inflation and beat the pathetic interest rates in banks.

But nowadays they are investing more in art, and not exclusively the works of Chinese artists. I've heard anecdotes of rich Chinese businessmen who have put Picassos and Impressionists up in their offices and find Caucasians immediately take them more seriously when they see what's hanging on the wall.

According to research firm Artprice, the value of art auctioned in China in 2011 accounted for 42 percent of the world's total that year.

Sound like the Japanese in the 1980s?

And it's not only art mainlanders are buying, but also fine wines, snapping up top Bordeaux names and even vineyards.

Jewellery is also another hot property. I recently talked to the head of the high jewellery division of a top French luxury jeweller who observed not just mainland Chinese, but Chinese from Hong Kong, Taiwan and Singapore were also wealthy clientele.

"Those coming from oil-producing countries are very rich," he said. So that included the Middle East, Russia and South America.

He adds that while they are rich, they become even richer because they have the capital to buy things relatively cheaper that will appreciate in value with time, and jewellery is one of those investments.

In the case of this luxury brand, some clients buy pieces worth several million Hong Kong dollars after only looking at the sketch. And since this brand usually does very well at auction, gaining some 25 to 30 percent in value after holding on to it for 10 to 15 years, what's not to like?

While this Frenchman is keen to promote the brand's jewellery pieces like works of art due to the craftsmanship of the artisans who have decades of experience cutting and polishing gems, do the buyers really care? In the end they are looking for ways to increase their return on investment.

In other words, finding ways to make themselves even more obscenely wealthier than they are now...

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