The bullish Chinese art market will likely come under increasing strain in the coming months amid the bleak global economic outlook, say dealers and market participants ahead of major seasonal sales in Hong Kong.

Hong Kong's twice-yearly Asian arts sales in the spring and autumn are a major fixture in the global arts calendar, attracting the world's top dealers and collectors to the city now considered the world's third-largest art auction hub after London and New York.

Valuations for top-flight Asian artwork, particularly Chinese contemporary paintings, have rocketed in recent years, with record-breaking prices for works by artists such as Zhang Xiaogang and Zeng Fanzhi boosted by speculative frenzy.

A Zeng painting of masked figures fetched US$9.7 million this spring, a then-auction record for Asian contemporary artwork.

Sotheby's will kick off its autumn sales today with a trove of Asian art up for grabs including Chinese ceramics and paintings, rare Qing Dynasty treasures, Southeast Asian artwork, jewelry and watches over the next five days.

But some market players say demand is waning amid the global turmoil.

"I have a lot of clients from overseas, from the States and Europe and they won't want to attend the auction because the Dow went down so much," said Kevin Lin, a fine art dealer in Taiwan.

Of Chinese ceramics, Lin said: "Prices are not going to go crazy like before, but stay at the lower estimates."

With the dimming global economic outlook and the flow of credit freezing up in money markets, Sotheby's CEO for Asia Kevin Ching said its earlier total sales estimate of HK$2 billion (US$257.5 million) for the Hong Kong sales could be impacted.

"Bearing in mind what has happened since, we've approached some consignors to see if they'd like to lower their reserve or whatever but it's very interesting that the majority of the people that we contacted seemed comfortable or optimistic enough to stick to the original reserves," he said.

Sotheby's shares have dropped 22 percent in the past three months, and 61 percent over the past 12 months.

Ching said strong demand from wealthy Chinese mainland buyers would prop up the market, with top lots such as a set of Qianlong imperial jade seals and scrolls in demand.

The Hong Kong International Art and Antiques Fair is expected to sell a total of HK$140 million, at least equal to last year's haul.

"Everybody is more cautious. So the items of good quality will turn out to be more and more important," said Andy Hei, founder and director of the fair.

(Shanghai Daily October 4, 2008)