by Michelle Tay

'The next big thing' is how some experts describe South-east Asian art, with Me And My Coke fetching five times its estimated price in April. Photo: Laserati Auctioneers

It pays - literally - to have art hanging on your living room wall, especially when the pieces could reap returns similar to yields from stocks and bonds.

Although art is traditionally bought to be admired for its artistic value, there is no harm in keeping some for their investment value.

According to Ms Tang Wen Li, the Singapore representative for auction house Christie's, the view that art can be a good investment, like equity and fixed-income issues, has become more popular in recent years.

'Over the long term, returns from art are comparable to those from stocks and bonds. The art market is very weakly correlated with the equities market, meaning that art has a potentially useful and valuable role to play in portfolio diversification,' she adds.

Dr Oei Hong Djien, 69, a famed Indonesian art collector, is one such investor sitting on a 'gold mine' of art.

Pieces by Indonesia's Jendela Group that he bought in the early 1990s for between 500,000 rupiah and one million rupiah are today worth more than 50 million rupiah (S$7,400), he said.

Experts say South-east Asian art is fast becoming 'the next big thing', because of a growing global interest in modern and contemporary art from the region.

In April, Sotheby's held a sale of modern and contemporary South-east Asian art for the first time in Hong Kong. Total sales were almost double the auction house's estimate, at nearly HK$76 million (S$13.3 million).

Three weeks ago in Amsterdam, 17 pieces of contemporary Asian and South-east Asian art went under the hammer for 120,000 euros (S$254,444) in an auction held by Asia-based Larasati Auctioneers.

In a Singapore auction in April, Indonesian artist I Nyoman Masriadi's Me And My Coke sold for S$240,000 - more than five times its estimated price - to a buyer from Monaco.

But not all prices are that steep. Vietnamese artist Dang Xuan Hoa's My Family fetched a relatively reasonable 6,875 euros at the auction.

Larasati said it has noticed a steadily increasing number of registered bidders for these artworks from all over the world - and 65 per cent of its customer base is now Singaporean.

Interested in the art of, well, investing in art?

We got the help of experts from auction houses Sotheby's, Christie's and Larasati to dish out advice on six things you should know.

PAINTING AN ACCURATE PICTURE

Who are some of the big names in South-east Asian art now, and why?

All experts say Balinese artist I Nyoman Masriadi - who paints in a signature style of bloated, comical figures which poke fun at social conditions - is one to look out for.

In April, Sotheby's auctioned off one of his works for HK$2.89 million (S$506,756) - a record for any contemporary South-east Asian artist.

Others include Rudi Mantofani and Agus Suwage, both from Indonesia; Thailand's Natee Utarit who has a classic-realist style; Malaysia's Ahmad Zakii Anwar, who addresses the issues of identity versus anonymity; and Filipina Geraldine Javier, who explores contemporary human conditions of solitude, absurdity, imaginary, fantasy and reality.

'As a category, South-east Asian art is seen as having lots of potential, in terms of fresh talent and relatively inexpensive prices, especially when compared with Chinese, Indian, Korean and Japan contemporary art,' says Ms Keong Ruoh Ling, the head of South-east Asian modern and contemporary art at Christie's.

Mr Daniel Komala, the chief executive of Larasati Auctioneers, has this advice: 'To maximise returns, an art investor should invest in emerging icons or museum-quality pieces that have yet to appreciate in value as they are still relatively unknown.'

What about Chinese art? How does one invest smartly when prices are just soaring?

In November 2006, a 1920s work by Xu Beihong, one of China's best-known, early 20th century painters, sold at Christie's for US$6.9 million (S$9.45 million), a record for any Chinese painting.

In 1994, Chinese artist Yue Minjun merited only US$5,000 when he sold his painting Gweong Gweong, inspired by the bloody Tiananmen Square crackdown in 1989.

Last month, the work fetched US$6.9 million at a Christie's Hong Kong auction.

In April 2005, the same artist's Kite was sold by Larasati Singapore for US$120,000. Then in November 2006, it was sold by Christie's for just under US$1 million.

According to Chinese art website Artron.net, auction prices for pieces by China's 18 hottest artists multiplied 13 times from 2003 to 2007.

'We believe the growth is here to stay,' says Mr Eric Chang, the international director and head of Asian contemporary and Chinese 20th century art at Christie's, adding that the rise in prices and popularity reflects the economic and cultural changes and the enormous wealth being generated in the region.

If you're keen to start collecting Asian contemporary art but feel priced out, he has this advice: Explore newer artists or pieces in lesser-known mediums from established artists.

He adds: 'Artists from South Korea, Japan, India and South-east Asia are doing some incredible things and are certainly worth exploring.'

Why does art appreciate? Is it a sure-win type of investment?

It's important to note that not all art will appreciate, warns Mr Jehan Chu, the head of client development in Asia at Sotheby's.

Says Mr Komala: 'But good art will normally appreciate for one simple reason: Good art is a lot less available on the market.'

As far as depreciation goes, there have been periods when certain categories of art have dipped in price. Take Impressionist art, whose value has halved since reaching a peak in 1990.

But on average, indicators like the Mei-Moses Fine Art Index - created by New York University professors Mei Jianping and Michael Moses using sales data from fine art auctions at Sotheby's and Christie's - have shown that art as a general market performs in manner similar to the Standard & Poor's (S&P) 500.

The latter is a market index representing the stocks of 500 large, publicly held companies and is considered to be a bellwether for the United States economy.

In addition, studies have shown that including art in a portfolio of assets can reduce overall risks on return.

What sort of returns can an investor expect?

Like blue-chip stocks, well-known paintings by blue-chip artists are known quantities and offer safety and stability.

Also as with stocks, the greatest opportunity for growth in art values comes when investors suddenly focus on a hot new sector or name.

But as Christie's Singapore representative Tang Wen Li says: 'Art is a different asset class from equities and other financial instruments. Different categories - such as contemporary art, jade carvings, Chinese paintings or even manuscripts or oriental carpets - have different benchmarks and thresholds of returns.'

According to a Wall Street Journal article in 2004, the broad Mei-Moses All Art Index appreciated at an annualised pace of 12.1 per cent in the last 50 years - that is half a percentage point higher than the return of the S&P 500 and 5.6 percentage points greater than the return from 10-year US Treasury bonds.

Another indicator - an art investment fund called Cannonball Art Fund - said returns have averaged 20 per cent a year since the fund, active in New York, London and Singapore, was set up in 1999.

What should an investor look for when picking an artwork or artist?

'You can call good art to mind like the melody of a beautiful song. There's no shortcut when you're learning how to separate good art from bad,' says Mr Komala.

Experts recommend visiting reputable galleries and consulting as many experts as you can to find out more about art that you like.

Ms Tang advises going online to get updates on trends and historical prices.

Websites like artnet.com, Artron.net and artprice.com provide data on the prices fetched by artists at international auctions.

Indexes like the Mei-Moses All Art Index compare returns on art with the S&P 500 and US Treasuries over a period of time.

'Don't be afraid to express how you feel and ask what you may think are dumb questions,' adds Mr Komala.

Is it worth investing in art funds, or should an investor stick to artworks?

Art funds, in essence, allow people with at least $250,000 to take a punt on the art market.

The only benefits are economic, since investors don't get to hang the paintings on their walls. Art is just another asset class, like stocks or commodities.

Some art funds have bases in Singapore, like the Meridian Emerging Markets Art Fund, which focuses on contemporary art from emerging markets, and the Cannonball Art Fund, which invests in works by 'blue-chip' artists such as Andy Warhol.

'Art funds are vehicles that allow for the most diversified risk. Unfortunately, these funds satisfy only financial goals, and don't allow the investor to look at the work,' says Mr Chu.

Ms Tang's take is that the emergence of art funds reflects the increasing maturity and sophistication of the art market.

Mr Komala says there's a risk involved if living artists in a fund 'respond to the fast-growing demand by producing trash in huge quantities, which in turn could cause the market to crash eventually'.

But, he adds, art funds could also play an important role in helping to sustain the growth of the market.

At the end of the day, the value of an artwork is determined by demand and supply - and auctions are the most direct way of determining the market price.

This article was first published in The Straits Times on June 24, 2008.