- The MoneyFitt Morning
- ☀️☕️ The Vogue of Sustainable Fashion
☀️☕️ The Vogue of Sustainable Fashion
📊 Also: China export drop; Nikkei up Oppa down; TW election; Burberry checked; Fed cuts?; US banks cut! 🎓 “The Nikkei”
The Vogue of Sustainable Fashion
📊 In the Markets
China export drop; Nikkei up Oppa down; TW election; Burberry checked; Fed cuts?; US banks cut!
📖 MoneyFitt Explains
🎓 “The Nikkei”
💸 Personal Finance Corner
The MFM has touched on the sustainability of the fast fashion industry from time to time when writing about Spain’s world-leading Zara and its long-time Euro-competitor, Sweden’s H&M, the UK’s struggling ASOS, China’s fast-growing Temu/PDD, and their hated crosstown rival Shein, which has its blockbuster IPO coming up (with a surging, soon-gaming-free TikTok disrupting all the above.) Our guest writer today sashays through the sector and calls us all to action!
🍃 Embracing Change: The Vogue of Sustainable Fashion 🍃
The tides of the fashion world are turning. Amidst the growing wave of environmental awareness, the industry stands at the crossroads of change. Moving beyond the ephemeral allure of fast fashion, we're witnessing a profound shift towards sustainability—a change driven not by fleeting trends but by the critical need for eco-conscious production methods in one of the planet's most influential sectors.
..... ▷ Fast Fashion's Footprint: A Call to Action
The fashion industry casts a long shadow on our planet, with its carbon footprint shaping climate change narratives and its waste accumulation presenting formidable environmental challenges:
1. Carbon Footprint: A notable contributor to global emissions, fashion's carbon cost is a stark reminder of the urgency to weave sustainability into the fabric of this glamorised industry. 💨
2. Waste: An estimated 92 million tons of textile waste yearly reveals an inconvenient truth behind our wardrobes, calling for a reevaluation of our consumption patterns. 🗑️
3. Water Consumption: The staggering water requirements of garment production, juxtaposed against the preciousness of this life-sustaining resource, underscore the pressing need for water-wise practices. 💧
4. Labour Rights: Moreover, the ethical dimension of labour in fashion—often marred by exploitation—demands a shift to humane, fair, and equitable working conditions. 👥
..... ▷ Sustainable Fashion: A Tapestry of Solutions
- Materials Matter: Durability and eco-friendly materials, such as organic cotton and novel fibres like Tencel, exemplify fashion's green transformation—a commitment to longevity over disposability. 🌿
- Ethical Manufacturing: Championing safe workspaces and fair wages, sustainable fashion is casting a spotlight on ethical production, fueling a movement towards a more just industry. 👔
..... ▷ The Circular Economy: Fashion's Future
- Innovative Reuse: Recycling and upcycling represent fashion's reinvention, where waste materials are reborn with a new value, and old garments find second lives in the art of upcycling, championed by businesses such as Roses of Sharon: https://upcycle.com.sg/
- The Second-Hand Surge: Thrift and vintage stores like REFASH are enjoying a renaissance, keeping clothing in use longer and challenging the status quo of constant newness.
- Rent, Repeat: Rental platforms like Style Theory are disrupting the fashion scene, offering a chic yet sustainable way to indulge in style without the environmental price tag.
..... ▷ The Fabric of Our Future:
Our journey to sustainable fashion is woven with threads of innovation, responsibility, and collective action. As we educate and adapt, we can dress tomorrow's world in the sustainability it deserves. Together, let's redefine the essence of style! ✨🌍
Affordable and unsustainable?- Image credit: Amruta Khanvilkar via Tenor
Guest writer: Dr. Christina Chua: SVP in Wealth Management, Where Finance Gets Serious, and Fun Gets a PhD. This article is for information only and not investment advice. The writer may have long or short positions in the companies mentioned above. All opinions are hers and hers alone. Please see the important disclaimer at the bottom.
🇸🇬 Singapore: Let’s Get MoneyFitt!
📊 In the Markets
Asia markets (except for Japan’s, of course) weakened as China logged its first annual export decline in seven years, with Hong Kong's Hang Seng down by 0.61% and China's CSI 300 dropping a little less, down 0.35%. China's consumer price index showed deflationary pressures continue, falling 0.3%, though better than the bleak 0.5% price drop seen in November and the 0.4% annual pace expected by Shanghai’s Finest. Exports for December came in a bit better than expected, but overall, total trade was down in 2023.
In contrast, Japan's stock benchmarks hit eight consecutive winning sessions, with both the Nikkei 225 (which we rarely look at) and Topix continuing their record rally, reaching levels not seen since 1990. One result of the Nikkei being “price-weighted” and focused on the 225 largest companies is that it tends to be more exporter-focused than the TOPIX or Tokyo Stock Price Index, which is an all-stock, market cap-weighted index, and hence tends to benefit more from a weaker Yen… a negative for the export-oriented South Korean economy.
Not by coincidence, South Korea's KOSPI (Korea Composite Stock Price Index) marked its eighth consecutive loss on Friday, with a drop of 0.7%.
Though the KOSPI includes all common stocks traded on the Stock Market Division of the Korea Exchange, weighted by market cap, and so is not specifically export-oriented, it does reflect the performance of large companies that tend to be heavily involved in exports. South Korea is known for its export-driven economic model, with major industries such as electronics, automobiles, and petrochemicals playing a crucial role in the country's economic growth, so the performance of the KOSPI is closely tied to the fortunes of these export-oriented industries.
Over the weekend, Taiwan's presidential election secured a third consecutive term for Vice President Lai Ching-te's Democratic Progressive Party, although, importantly, the party lost its parliamentary majority. Commentators note that global worries about Taiwan-China relations may ease on relief that Lai's hawkish stance on formal independence may not continue, thereby avoiding a hostile response from China that could disrupt the global semiconductor industry.
European markets were also mixed, with the luxury sector's softness continuing. So much for the 2022 to early 2023 theory of rich people and the sector as impervious to downturns.
Burberry cited a deepening slowdown in luxury goods demand for its second downgrade since November and reflects broader struggles in the luxury sector, impacting brands like LVMH and Kering. Burberry shares fell 6% for a one-year decline of 44% in GBP terms, while LVMH and Kering dropped 0.3% and 1.2%, respectively, clocking in 15% and 35% losses over the last year. Hermès was flat and is up 13% over the last 12 months. (MFM: “Luxury Slowdown.”)
The geopolitical uncertainty in the Middle East, coupled with inflation and cautious spending in the US and Europe, has further clouded the industry's outlook, along with long-since evaporated expectations for a strong post-pandemic rebound in China.
US stocks closed little on Friday as traders digested mixed bank earnings and lower-than-expected inflation data.
December's US producer prices saw an unexpected drop as food and diesel prices fell while prices for services were unchanged for a third month running. This is in sharp contrast to the hotter-than-expected consumer inflation data from the day before (though arguably driven by backwards-looking, questionably gathered housing cost data that will roll over soon.) It’s a tough life being a forecaster.
This raised rate cut expectations to a 79.5% chance of at least a 25-basis-point (0.25%) cut by the Fed in March based on the prices of Federal Fund Futures (which may not be the same as top-down macroeconomic forecasts from “experts”.) This was up from 73.2% the previous day and the low to mid-60s% in the last few weeks, though still down from the 80-90s% range around the time of shortly after Fed Chief Jay Powell’s “Dovish Pivot” in his comments after the mid-December meeting. (MFM: “Attack of the Doves.”)
The darker blue bars in the middle and on the left show the more recent expectations of a cut, while the ones on the right show no change. Nobody is expecting a rate hike, so there are no bars further to the right.- Image credit: CME FedWatch Tool
Despite this, the USD rose on some safe-haven buying following US and British airstrikes in Yemen in response to the Houthi rebel attacks on commercial shipping in the Red Sea. (MFM: “Houthi New Year for Maersk.”)
Bank of America's shares fell 1.06% due to a Q4 profit decline, while Wells Fargo's warning of a 7-9% net interest income drop in 2024 led to a 3.34% share weakness. Citigroup, despite a $1.8 billion Q4 loss and planned job cuts, rose 1.04%, while JPMorgan Chase was only mildly lower after reporting its best-ever annual profit. JP added over 16,000 employees in the year, partly from the rescue of First Republic in May (remember that mini-banking crisis?!), but its other peers (and Citi) trimmed their workforces. Wells Fargo and Bank of America reduced workforces by 5% and 2%, respectively, in 2023, reflecting the industry's low levels of dealmaking and soft demand from borrowers.
Citi, after reporting a "clearly disappointing" $1.8 billion fourth-quarter loss marred by one-off charges, said it expected 20,000 further job cuts over the next two years, including layoffs from a sweeping reorganisation under CEO Jane Fraser. She was nicknamed “Fraser the Razor” for her reportedly sharp thinking by the FT as she entered the CEO job in 2021… not for the job cuts under her stewardship. (MFM: “Doing a Citi Job.”)
📖 MoneyFitt Explains
🎓 The Nikkei 225 Index
Japan's headline index is the Nikkei 225, though most professional investors benchmark against the all-market TOPIX or other indices like the MSCI Japan index, with (not by coincidence) 225
constituents, covering about 85% of the free float-adjusted market capitalisation in Japan.
Almost no ETFs track the Nikkei, though almost all newspapers do, given its heritage and history, as it was originally developed by Dow Jones in 1950 as the Nikkei Dow Jones Stock Average, sharing its main defining characteristic with “The Dow” in the US: Price-weighting.
The Dow is one of the most famous and widely followed stock market indexes in the world, though not very often used as a benchmark for active or index funds and ETFs.
Originally set up in 1896, it's more correctly called the Dow Jones Industrial Average or DJIA. It's made up of 30 large, liquid blue-chip US companies listed on the New York Stock Exchange and Nasdaq and needn't actually be an "industrial" company, just not a utility or transport company. Current components include McDonald's, Visa, JPMorgan Chase and Disney. Having only 30 components, however, means the index is not that representative of the economy. (The Wilshire 5000 Total Market Index would be closer, but even so, no stock market or index is exactly the same as the economy it's in.)
Unlike the S&P500 and most other major indexes, the DJIA is not weighted by market capitalisation (share price X number of shares) but an AVERAGE of their share PRICES… so companies which have a higher share price have a greater weighting in the index, which makes limited sense to many investment professionals. (To partially get around this rather eccentric approach, they came up with a continuously adjusted divisor to smooth the effect on the index of dividends, stock splits and one-off changes like corporate spin-offs.)
The Dow Jones company, which owns the Wall Street Journal, was bought by News Corp in 2007. The index business (including the DJIA) was sold off five years later to a joint venture between S&P Global and the CME Group.
Addendum: “Nikkei” doesn’t quite rhyme with “pay” but is closer to that than to either “eye” or “see”, with the first part closer to “knee” than “Nick.”
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