COLLECTABLE: THE OTHER SIDE OF THE COIN

Chock full of their own per­sonal sto­ries, rare coins are ap­peal­ing to a niche group of col­lec­tors – and, in­creas­ingly, in­vestors who are re­al­is­ing their po­ten­tial.

The Peak (Hong Kong) - - Contents - STORY FANNY POTKIN

Chock full of their own per­sonal sto­ries, rare coins are ap­peal­ing to a niche group of col­lec­tors – and, in­creas­ingly, in­vestors who are re­al­is­ing their po­ten­tial

It is the dol­lar that is worth mil­lions and has trav­elled through time.

A rare 1794 ‘Flow­ing Hair’ sil­ver dol­lar, de­pict­ing a solemn Lady Lib­erty with her hair swept back­wards, was one of the first dol­lar coins struck by the US Mint and is set to be auctioned off at Stack’s Bow­ers & Pon­te­rio in Au­gust. The iconic ‘St. OswaldNor­web 1794’ coin was ob­tained new as part of a pair by Wil­liam Strick­land, an 18th-cen­tury English gen­tle­man dur­ing a tour of the United States, where he met with Thomas Jef­fer­son and thenpres­i­dent Ge­orge Wash­ing­ton. It would stay in Strick­land’s fam­ily – even­tu­ally tak­ing on the name of his de­scen­dant Lord St. Oswald – un­til 1964, when it was bought by famed Amer­i­can coin col­lec­tor and diplo­mat Henry Nor­web for £4,000 (HK$40,400). The coin sold for US$242,000 in 1988 and re­mained out of the pub­lic eye for 29 years. Eyed by col­lec­tors from around the world, the 1794 dol­lar is ex­pected to fetch the price of its sib­ling, which sold in 2015 for US$4.99 mil­lion.

Once a gen­tle­manly pur­suit, col­lect­ing rare coins is now a bil­lion-dol­lar busi­ness. The 2017 Knight Frank Lux­ury In­vest­ment In­dex shows coins to be the world’s third best-per­form­ing lux­ury as­set – with a 195 per­cent ap­pre­ci­a­tion in value over the last decade. A re­cent sur­vey by the Pro­fes­sional Nu­mis­ma­tists Guild sug­gests coins sales by ma­jor auc­tion firms to­talled more than US$4 bil­lion in 2016 alone. Six- or seven-fig­ure price tags are now the new nor­mal for rare spec­i­mens like the St. Oswald-nor­web 1794 sil­ver dol­lar – in 2016, a rare San Francisco dime from 1894 sold for twenty mil­lion times its orig­i­nal value.

Col­lect­ing coins is a pur­suit that has been en­joyed by the wealthy since the Re­nais­sance, a trait that earned it the moniker ‘the hobby of kings’. But for many of to­day’s trea­sure seek­ers, it is as much about mak­ing a smart in­vest­ment as it is about ac­quir­ing a rare col­lectible. An in­creas­ing amount of in­vestors are seek­ing out rare coins as a way to di­ver­sify their port­fo­lio and pro­tect them­selves from stock mar­ket tur­bu­lence. Emerg­ing mar­kets have also in­tro­duced new col­lec­tors, with a quickly ex­pand­ing pool of bid­ders and buy­ers from China, In­dia, Rus­sia, east­ern Europe and Latin Amer­ica.

Ex­perts point to the 2008 fi­nan­cial cri­sis as a turn­ing point; prompt­ing many to pour their for­tunes into tan­gi­ble non-fi­nan­cial “trea­sure as­sets” that were not cor­re­lated to the stock mar­ket, in­clud­ing rare coins. Blan­chard & Com­pany, an Amer­i­can in­vest­ment firm spe­cial­is­ing in coins and pre­cious met­als, sug­gests that col­lectible coins can de­liver a higher an­nual re­turn than gold and act as a suc­cess­ful hedge against in­fla­tion.

“Dur­ing pe­ri­ods of un­cer­tainty and eco­nomic tur­moil, peo­ple have al­ways put their money in

THE 2017 KNIGHT FRANK LUX­URY IN­VEST­MENT IN­DEX SHOWS COINS TO BE THE WORLD’S THIRD BEST-PER­FORM­ING LUX­URY AS­SET – WITH A 195 PER CENT AP­PRE­CI­A­TION IN VALUE OVER THE LAST DECADE

hard as­sets like gold and sil­ver,” ex­plains Ni­rat Lertchitvikul, di­rec­tor of Asian op­er­a­tions for coins auc­tion­eer Stack’s Bow­ers & Pon­te­rio. “There’s the be­lief that hard as­sets are some­thing you should be keep­ing your wealth in. In­vestors are also now mak­ing col­lectibles a small part of their port­fo­lio. With gold and sil­ver coins, you get the best of both worlds.”

But the pull be­hind col­lectible coins mar­ket is also emo­tional. “Hold­ing a rare coin is like hold­ing his­tory in your hands,” says Lertchitvikul, who de­scribes in­vestors and col­lec­tors as be­ing lured by the rar­ity, unique­ness, and con­di­tion of the coins. The his­tory or char­ac­ter por­trayed on a coin will of­ten in­crease its ap­peal.

“All coins and ban­knotes have a story be­hind them,” he adds. “How were they made? Why were they made? Of what in­ter­est are they to the re­gion? The value of rare coins is in fact largely de­ter­mined by their col­lectible value – not their pre­cious metal con­tent.”

Re­search by Bar­clays Wealth and In­vest­ment Man­age­ment found that the world’s mil­lion­aires cur­rently de­vote an av­er­age 9.6 per cent of their wealth to trea­sure as­sets, cit­ing a de­sire for tan­gi­bil­ity, a be­lief that they will ap­pre­ci­ate in value, and con­cerns about global mar­kets. For Hong Kong mil­lion­aires, that fig­ure climbs up to 14 per cent, with coin col­lec­tions be­ing a pre­ferred in­vest­ment.

And the trend is prov­ing true across Asia as a whole. While the coin in­dus­try in Asia has a long road to ma­tu­rity, lo­cal coin mar­kets in China, In­dia and South­east Asia have all ex­ploded in re­cent years.

“The rare coin mar­ket, es­pe­cially in China and Hong Kong, has grown by more than 50 per cent for us in the past six months,” says Ken­neth Yung, who heads Asian op­er­a­tions for Her­itage Auc­tions. “Mod­ern coins have been slower, but the vin­tage coins mar­ket has been go­ing very strong in 2017, with the in­ter­net mak­ing it eas­ier than ever be­fore for col­lec­tors to join.”

Ev­ery time Her­itage or­gan­ises a show in Asia, “thou­sands of deal­ers and col­lec­tors have come, mostly from China, but also from South­east Asian coun­tries like Malaysia, Sin­ga­pore, and In­done­sia,” notes Yung.

Other ex­perts and col­lec­tors con­cur, de­scrib­ing the value of Asian coins as ‘bur­geon­ing’ as a re­sult of their grow­ing economies.

“Coins from the re­gion have his­tor­i­cally been re­moved to the west. But now that Asian economies are do­ing well, Asian col­lec­tors have started buy­ing their own her­itage back,” Lertchitvikul says.

In In­dia, rare coins is­sued by long-reign­ing em­per­ors are par­tic­u­larly prized by col­lec­tors, while in China, coins from the late 1800s and first half of the 20th cen­tury are favoured.

One notable ex­cep­tion is Ja­pan, whose coin mar­ket is con­sid­ered Asia’s most di­ver­si­fied.

“Since the 1970s and 1980s, Ja­panese coin col­lec­tors have bought ev­ery­thing in sight, says Lertchitvikul. “Their coins have peaked out so they are buy­ing Euro­pean coins, es­pe­cially English

“COINS FROM THE RE­GION HAVE HIS­TOR­I­CALLY BEEN RE­MOVED TO THE WEST. BUT NOW THAT ASIAN ECONOMIES ARE DO­ING WELL, ASIAN COL­LEC­TORS HAVE STARTED BUY­ING THEIR OWN HER­ITAGE BACK”

– Ni­rat Lertchitvikul, Stack's Bow­ers & Pon­te­rio

ones. The mar­ket for Bri­tish coins in Ja­pan right now ex­ceeds the lo­cal mar­ket in Eng­land.”

Yung ex­pects other regional mar­kets to soon act sim­i­larly. “Asian col­lec­tors are ex­pand­ing their fo­cus and look­ing at more coun­tries,” he says.

In the mean­time, the rapid blos­som­ing of the Asian coins mar­kets has meant that west­ern deal­ers are flock­ing to the re­gion to es­tab­lish a pres­ence.

Ac­cord­ing to col­lec­tors, the top end of many Asian mar­kets is be­ing driven by rare, showy coins, which grab the head­lines. Their high prices are be­ing driven by in­vestors seek­ing to make a profit.

“Spec­u­la­tors who don’t know about coins are usu­ally look­ing for some­thing sparkling. This group en­tered the mar­ket be­cause of the ris­ing pop­u­lar­ity and prices of coins,” notes Lertchitvikul. "They usu­ally go by the type of coins that are on the news."

This is a risky strat­egy that has led to rare coins sell­ing for far above their mar­ket value. “When you turn over coins to re-sell too soon and too fast, it makes the prices peak,” he adds.

This led to a bub­ble burst in the Chi­nese coins mar­ket in 2012 and a gen­eral slow­down of the Asian coin in­dus­try un­til 2014.

In­vestors look­ing to start buy­ing rare coins are typ­i­cally ad­vised to treat them as a medi­umterm as­set and wait a min­i­mum of five to ten years be­fore sell­ing.

But treat­ing coins as a longterm in­vest­ment can be even

more ben­e­fi­cial. “Coins have the char­ac­ter­is­tics to be­come an­tiques of the fu­ture,” writes the Bri­tish re­search firm In­tel­li­gent Part­ner­ship in the Al­ter­na­tive In­vest­ment Re­port on Rare Coins and Stamps (2015). As non­re­new­able as­sets, pre­serv­ing col­lectible coins for fu­ture gen­er­a­tions can thus be an ef­fec­tive way to pro­tect wealth.

But not every­one agrees. Some bro­kers rec­om­mend clients to steer clear from buy­ing rare coins and other trea­sure as­sets be­cause they are in­trin­si­cally spec­u­la­tive in­vest­ments.

A lack of spe­cial­ist knowl­edge can also ex­pose po­ten­tial in­vestors to risks of fraud and over­pay­ing. As a largely un­reg­u­lated mar­ket, rare coins can be bought from auc­tion houses, deal­ers, or di­rectly from in­di­vid­ual own­ers. Un­scrupu­lous sell­ers will reg­u­larly in­flate the grade of their coins or sell clients fake prod­ucts.

Ex­perts urge col­lec­tors to only work with rep­utable deal­ers and to make sure any prospec­tive pur­chases have been in­de­pen­dently au­then­ti­cated and graded.

“I’ve seen peo­ple come cry­ing to me be­cause they lost their life sav­ings af­ter buy­ing fakes,” notes Lertchitvikul. Both he and Yung em­pha­sise that any coin they auc­tion will have first been au­then­ti­cated by ei­ther the Pro­fes­sional Coin Grad­ing Ser­vice or the Nu­mis­matic Guar­anty Cor­po­ra­tion

Soon, it may not just be au­then­tic­ity that col­lec­tors will have to prove, but also le­gal pedi­gree. The ad­vent of more strin­gent cul­tural pro­tec­tion laws around the world means col­lec­tors and deal­ers can now find them­selves break­ing the law if they can’t ac­count for prove­nance.

In April, the Ger­man po­lice ar­rested four col­lec­tors in Mu­nich on sus­pi­cion of the il­licit sale of il­le­gally ob­tained coins. Un­der its 2016 Cul­tural Prop­erty Pro­tec­tion Act, the coun­try re­quires a le­gal prove­nance that ex­tends a min­i­mum of 20 years back for “ob­jects of cul­tural im­por­tance” and the grant­ing of an ex­port li­cense for ob­jects more than 70 years old that are worth more than €300,000 (HK$2,600,000). The law aims to pre­vent the loot­ing of an­tiq­ui­ties from vul­ner­a­ble coun­tries (no­tably by ter­ror­ist or­gan­i­sa­tions) and en­sure that art of “na­tional sig­nif­i­cance” does not leave Ger­many.

And other coun­tries are fol­low­ing Ger­many’s lead. In the United States, le­gal im­port re­stric­tions on cul­tural her­itage and traf­fick­ing led fed­eral prose­cu­tors in 2017 to seize from deal­ers an­cient coins from China, Cyprus, and China.

“Those laws are a pos­i­tive step against traf­fick­ing, be­cause they are ask­ing for this al­most pos­i­tive sort of due dili­gence, not just from deal­ers, but also from col­lec­tors,” says Steven Gal­lagher, as­so­ciate dean at the Chi­nese Univer­sity of Hong Kong’s law fac­ulty and an ex­pert in cul­tural her­itage laws.

Coun­tries in Asia with cul­tural pro­tec­tion laws could be headed to­wards the same path.

So what should bud­ding coin col­lec­tors do to get started on the right track?

“Es­tab­lish a rap­port with a dealer you trust and ask them a lot of ques­tions, mak­ing sure you get de­tailed prove­nance,” Gal­lagher ad­vises. “In due course, if prove­nance is an is­sue, it will be­come more dif­fi­cult to sell those as­sets, in which case their value will de­pre­ci­ate, not in­crease.”

THE TOP END OF MANY ASIAN MAR­KETS IS BE­ING DRIVEN BY RARE, SHOWY COINS, WHICH GRAB THE HEAD­LINES. THEIR HIGH PRICES ARE BE­ING DRIVEN BY IN­VESTORS SEEK­ING TO MAKE A PROFIT

OPENER A 1804 Draped Bust Sil­ver Dol­lar coin sold for US$3.3 mil­lion in 2015.

RIGHT A 1815 Capped Head Half Ea­gle coin was snapped up for US$ 822,500 in 2015.

RIGHT A se­lec­tion of very rare Amer­i­can coins, in­clud­ing a 1822 Half Ea­gle, or Five Dol­lar Gold Piece, and an 1804 Sil­ver Dol­lar, went un­der the ham­mer at Sotheby's Lon­don in 2015. BOT­TOM RIGHT A 1794 Flow­ing Hair Sil­ver Dol­lar coin from the St. Oswald-nor­web col­lec­tion will be up for grabs at a Stack's Bow­ers & Pon­te­rio auc­tion in Au­gust 2017.

BOT­TOM LEFT A 1793 Flower Hair Cent was sold for US$998,750 in 2013. BOT­TOM A 1913 Lib­erty Head Nickel was sold for a record-break­ing US$3.17 mil­lion in 2013.

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