New Directions, New Investments
Alternative investments aren't going anywhere, but they are moving in new directions.
Despite the current volatile state of Hong Kong's political landscape and new government forecasts of just 1% GDP growth for 2019, Hongkongers were out in force at the end of August to purchase the latest offerings by Billion Development (the second batch of The Aurora in Tsuen Wan) and Wheelock Properties (LOHAS Park's Phase IXA Marini). Between them, the developers moved nearly 350 units, averaging HK$17,000 to $26,000 per square foot. It begs the question of whether or not the Hong Kong appetite for investment has dwindled or been rekindled.
“We are expecting that activity from Hong Kong-based capital will recover in H2 2019 as more investors seek to diversify their portfolios amid recent socio-political unrest in their home market,” theorised CBRE'S executive director and head of capital markets, Reeve Yan. But Yan was referring to real estate. Is the taste still there for assets such as art, or investments that help the planet?
Alternative Stalwarts
Regardless of the market activity in August, sales volumes have dropped in June and July—even before any protests—and were down over 20% from the first half of 2019 (though just 1.1% from 2018 overall). Sales momentum is likely to slow for the rest of the year in the shadow of political and economic uncertainty, but that doesn't mean investing is going to come to a screeching halt, including for alternatives to conventional assets like stocks (which can be volatile too: just look at last summer), currencies (just as likely to bounce around, with the pound expected to dip a bit more in the near future in light of the expected October 31 Brexit) and hit-and-miss assets such as gems.
Though it's been a viable investment for many years, mainstream and entrylevel consumer art investment remains on the fringes even with a key feature of art being its singularity—just for a start. “Extreme rarity is the reason to make fine art a good investment alternative,” begins Joline Chan, art advisor with Hong Kong's newest dealer, Fine Collectibles. “We've heard of how collectors strove to bid for an artwork, a one-and-only they loved. Secondly, art prices are not as volatile as stocks. Lastly, even if your piece of artwork does not go up in price, you will still enjoy viewing a piece you like hanging on the wall of your house or office.”
The environment is also slowly but surely moving from alternative to mainstream, with more and more investors seeking out green initiatives as an element in greener stocks. Asia Plantation Capital waded into investment in forest management many years ago, when awareness of forest resources was just emerging. For investors, forestry should be seen along the same time lines as real estate. “Forestry is a mid- to long-term investment and despite all market conditions has always outperformed many traditional investments,” argues Gerard Mcguirk, Asia Plantation Capital's sales director. “And with the continuing threat of global warming and climate change, forestry prices will increase as demand becomes higher and supply decreases.”
Reaching Beyond
Fine Collectibles' Chan practises what she preaches, and recently changed focus from fine wine (another popular alternative asset) to art, a personal decision in line with her own interest in arts and culture; art is a passion she decided to follow. As Chan sees it, future growth in art is wholly dependent on an investors' personal knowledge. “I would encourage [people interested in art] to build more knowledge in the area. They will find themselves walking into a world full of enjoyment.” As a former wine dealer,
Chan concedes that both have potential for strong value appreciation, and are smart choices for any diverse investment portfolio. However, quantity is once again the cornerstone. With the exception of prints, wine is made in the hundreds, sometimes thousands. “Though fine wines have limited production, a piece of artwork is definitely unique, having no identical piece to compete with on price,” she notes.
With all eyes on China, Chan is looking to Southeast Asia for investment potential in the coming years. “I’m now working with some emerging Southeast Asian artists and I’m organising a private exhibition for some investors in October where I will also give a talk on why it’s now a good time to collect Southeast Asian arts.”
With forest management and sales of indemand woods and wood by-products established across Asia, Mcguirk is now focusing on Asia Plantation Hong Kong— unrelated to APC—A new organisation venturing into what most of us would consider traditional farming. The Piggy Bank has established itself in pig farming due to the one-two punch of Swine Flu outbreaks and an ongoing demand for pork. The sustainable, ethical breeding facility is at the heart of “quite a unique situation that is developing due to the outbreak of African Swine Fever sweeping through Asia and Europe,” says Mcguirk. “Due to the huge culling of China’s herd of pigs, there is a huge hole in supplying breeding stock that will be required to replace the herds that are being culled. Current estimation is up to 50% of the 360-million herd has been wiped out.” As an investment product by Asia Plantation Hong Kong, The Piggy Bank is offering up to 18% returns. At those rates the company is well named indeed.
Sales momentum is likely to slow for the rest of the year in the shadow of political and economic uncertainty, but that doesn't mean investing is going to come to a screeching halt.