Wealth

RECORD AUC­TION PRICES AND A SURGE IN ASIAN DE­MAND ARE TRANS­FORM­ING THE PEDES­TRIAN HOBBY OF STAMP COL­LECT­ING INTO AN AT­TRAC­TIVE AS­SET CLASS, WRITES Ru­pert Walker

Hong Kong Tatler - - Contents -

With record prices and a surge in Asian de­mand, stamps are at­trac­tive as­sets

Any il­lu­sion that stamp col­lect­ing is a dy­ing pas­time of el­derly en­thu­si­asts cling­ing to a child­hood hobby was em­phat­i­cally shat­tered in two ex­tra­or­di­nary min­utes this sum­mer. On June 17, a rare Bri­tish Guiana one-cent ma­genta postage stamp (de­scribed as the “Mona Lisa of stamps”) was sold to an anony­mous bid­der at Sotheby’s in New York for a record-break­ing US$9.5 mil­lion.

Mea­sur­ing 2.5cm by 2.5cm, the 19th­cen­tury stamp from the for­mer Bri­tish colony in South Amer­ica was de­scribed by the auc­tion house as the most ex­pen­sive item by weight and size ever sold. It smashed the pre­vi­ous record of US$2.3M paid at auc­tion in 1996 for the 1857 “Tre Skilling Banco” Swedish stamp. Three other bid­ders com­peted for the prize in those dra­matic min­utes—col­lec­tors from China and the Mid­dle East as well as a rep­re­sen­ta­tive of Queen El­iz­a­beth II’S col­lec­tion.

Yet it’s not clear if the bid­ders were avid col­lec­tors, in­vestors or both. The one-cent ma­genta has been sold three times be­fore, and on each oc­ca­sion set an auc­tion record for a sin­gle stamp, in­clud­ing the US$935,000 paid in 1980 by pre­vi­ous owner John du Pont, heir to the gi­ant chem­i­cal company who was later jailed for the 1996 mur­der of Olympic wrestler Dave Schultz. The buyer can en­joy pos­sess­ing the Holy Grail of stamps—but he or she can also ex­pect to make a healthy profit down the road.

Stan­ley Gib­bons, the premier stam­p­col­lect­ing house es­tab­lished in 1856, pub­lishes an an­nual cat­a­logue that pro­vides in­dica­tive prices and is recog­nised in the trade as the lead­ing au­thor­ity on phi­lately. It also ag­gres­sively pro­motes stamps as an al­ter­na­tive in­vest­ment.

“As an as­set class, ‘in­vest­ment-grade’ stamps of­fer port­fo­lio di­ver­si­fi­ca­tion with con­sis­tent re­turns that are un­cor­re­lated with stock mar­kets or prop­erty prices, his­tor­i­cally low price vo­latil­ity, and a steady mar­ket char­ac­terised by ris­ing de­mand and shrink­ing sup­ply,” says Marco Kaster, in­vest­ment di­rec­tor at Stan­ley Gib­bons in Hong Kong. How­ever, he adds, “Only one in a mil­lion col­lectable stamps meets the in­vest­ment cri­te­ria.” Rar­ity, con­di­tion, de­mand and ul­ti­mately price are the main de­ter­mi­nants.

But it has not al­ways been a steady ride. A philatelic bub­ble burst in the UK dur­ing the 1970s after stamps had been mar­keted as a way to pre­serve wealth. Clive Feigen­baum was forced out as chair­man of Stan­ley Gib­bons in 1984 and had to aban­don an early at­tempt to list the company on the London Stock Ex­change fol­low­ing rev­e­la­tions of al­leged dodgy business prac­tices. In 2006, a pyra­mid scheme in­volv­ing stamps in Spain and Por­tu­gal de­frauded thou­sands of in­vestors—and there have been pe­ri­odic sus­pi­cions that stamps have been used to laun­der cash. Nev­er­the­less, the GB30 Rar­i­ties In­dex, which tracks prices of 30 of the rarest and high­est-val­ued UK stamps, has achieved com­pound an­nual growth of 10.1 per cent over the past 40 years. Since the 2008 fi­nan­cial cri­sis, the in­dex has risen 68 per cent.

Stamps from Great Bri­tain and its em­pire have dom­i­nated the trade since the art of col­lect­ing be­gan. In the first half of the last cen­tury, George V’s ob­ses­sion with the pas­time led to the cre­ation of the vast Royal Philatelic Col­lec­tion.

The Penny Black has re­tained an iconic sta­tus be­cause it was the first-ever pre­paid postage stamp, ini­tially is­sued on May 6, 1840. But dur­ing Queen Vic­to­ria’s long reign, around 12 sep­a­rate print­ing plates were used to print 68 mil­lion Penny Blacks—though there are some valu­able Penny Blacks, they’re not the rarest of all stamps. How­ever, a block of 24 un­used Penny Blacks, the largest col­lec­tion in pri­vate hands and held in Stan­ley Gib­bons’ vault at Hong Kong In­ter­na­tional Air­port, has an es­ti­mated value of around US$1.8 mil­lion, ac­cord­ing to Kaster.

But Bri­tain’s pre-em­i­nence in the stamp world is be­ing su­per­seded. There are an es­ti­mated 60 mil­lion se­ri­ous col­lec­tors in the world—ac­cord­ing to Kaster, a third of them are Chi­nese and another third re­side in the rest of Asia. Ex­pats re­main the ma­jor mar­ket for Bri­tish stamps, but Chi­nese buy­ers through­out Asia as well as In­dian in­vestors have cre­ated new, bur­geon­ing mar­kets. In par­tic­u­lar, de­mand has surged for stamps from im­pe­rial China.

For ex­am­ple, there are only 14 un­used “golden dragon” stamps known to be in ex­is­tence. Those stamps were is­sued in 1897, and have their face value marked in cents and the old im­pe­rial cur­rency—a strip of three sold at auc­tion a few years ago for US$151,000. At the same Hong Kong auc­tion, a set of four stamps from the Cul­tural Revo­lu­tion fea­tur­ing a de­sign called “Mao’s 1968 In­scrip­tion to Ja­panese Worker Friends” has sold for more than US$1.15M. All told, the 600 lots, which also in­cluded stamps from Tai­wan, raised more than US$12M.

Ac­cord­ing to a Stan­ley Gib­bons study, be­tween 1989 and 2012, 200 of the rarest in­vest­ment-grade Chi­nese stamps recorded a com­pound an­nual growth rate of 11.6 per cent. There are now 15 to 16 auc­tions a year on the main­land and six ded­i­cated stamp auc­tions in Hong Kong, with Chi­nese buy­ers mak­ing most of the bids. The lead­ing auc­tion­eers— Spink, In­tera­sia, Zurich Asia, John Bull, Dy­nasty and David Feld­man—are all ac­tive in Asia, reg­u­larly re­ceive 60 to 80 bid­ders at each event and take a hefty 15 to 20 per cent of the buyer’s pre­mium. In ad­di­tion, in­vestors can ap­proach spe­cial­ist deal­ers, and on­line auc­tions are more preva­lent in a world­wide mar­ket that Stan­ley Gib­bons es­ti­mates is worth about US$6 bil­lion a year.

Clearly, stamps can only make up a small part of an in­vestor’s port­fo­lio. The mar­ket in in­vest­ment-grade stamps is much smaller than the head­line fig­ure, and col­lec­tions tend to be held for the long term—so prized stamps of­ten stay hid­den for a decade. But the re­turns are steady, which mat­ters more than ever when in­vestors are con­cerned that other as­set prices, such as stocks and prop­erty, might be ready to tum­ble. The great­est risk, says Kaster, is in “try­ing to do it your­self. In­stead, you must seek ex­pert ad­vice.” Per­haps equally as im­por­tant, it helps if you com­bine the mind of a shrewd in­vestor with the pas­sion of a col­lec­tor.

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