Asian shares eke out slim gains, dollar holds firm

By Wayne Cole

SYDNEY (Reuters) - Asian stocks drifted higher on Monday in sluggish trade as investors chose discretion over valour ahead of central bank meetings in Europe and the always-critical U.S. payrolls report.

MSCI's broadest index of Asia-Pacific shares outside Japan was just a shade firmer at 479.92.

Japanese markets were closed for a holiday.

Modest gains in Hong Kong and Australia were countered by losses in South Korea. Australian shares edged up 0.1 percent as another domestic bank reported record profits.

"We are bullish going into next year, but it wouldn't surprise to see some sort of breather ... We think any pullback is going to be very shallow," said Martin Lakos, division director at Macquarie Bank, of the Australian market.

Major currencies were likewise quiet with the dollar still well supported in the wake of upbeat U.S. manufacturing data that stirred speculation the Federal Reserve might scale back its bond-buying in December, rather than in March as many in the market currently anticipate.

There are no less than four Fed officials speaking on Monday, starting with Fed Bank of Dallas President Richard Fisher in Sydney. Fed Governor Jerome Powell and the heads of the St. Louis and Boston Feds all appear later in the day.

The dollar index was holding firm at 80.691 having climbed to a six-week peak on Friday. It was also up on the yen at 98.76 and threatening a major chart target at 99.00.

The dollar fared best against the euro which was undermined by speculation the European Central Bank (ECB) would have to ease again given disappointing news on unemployment and a startlingly low reading of inflation.

The common currency was pinned at $1.3494 on Monday, well below its recent high of $1.3832. The ECB holds a policy meeting on Thursday and it will be under intense pressure to stimulate the economy.

"We expect the opening statement, and Q&A, to have a distinctly dovish tone," wrote analysts at RBC Capital Markets in a note to clients.

"For now, we think that the Governing Council will refrain from any immediate action, but we expect the downbeat tone of next week's meeting to lay the groundwork for a policy response over the next few months."

The Bank of England holds it policy meeting on Thursday and is expected to stay on hold following a run of improving economic data recently.

A bigger event for markets will be Friday's U.S. payrolls report which is expected to show a modest rise of just 125,000 in October, amid some uncertainty about the impact of the government shut down.

A soft report, and particularly any rise in the jobless rate, would lean against the Fed tapering in December.

Also of note will be the U.S. gross domestic product (GDP) due on Thursday, expected to show annualised growth of 1.9 percent in the third quarter, down from 2.5 percent the previous quarter.

All the talk of Fed tapering saw U.S. Treasury yields rise for a third straight session on Friday. Yields on the benchmark 10-year U.S. Treasury note jumped to 2.63 percent, leaving behind the week's low of 2.47 percent.

Cash Treasuries were not trading in Asia on Monday due to the Japanese holiday, but Treasury futures were 2 ticks lower.

In commodity markets, prices were held back by the bounce in the U.S. dollar. Spot gold was trading at $1,315.06 an ounce, having crumbled from a peak of $1,361.60 last week. Copper was a touch firmer at $7,251 a tonne.

Oil prices steadied following last week's losses as a firmer dollar and ample supplies outweighed concerns about a drop in Libyan crude exports.

Brent crude for December delivery was up 16 cents at $106.01 a barrel. U.S. oil for December delivery added 8 cents to $94.69.

(Additional reporting by Thuy Ong in Sydney; Editing by Eric Meijer)

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Gold edges lower for sixth session on Fed stimulus worries

SINGAPORE (Reuters) - Gold eased for a sixth straight session on Monday to trade near two-week lows as renewed uncertainty over when the U.S. Federal Reserve will scale back its stimulus measures weighed on sentiment.

FUNDAMENTALS

* Spot gold fell 0.1 percent to $1,313.54 an ounce by 0014 GMT, after posting a near 3 percent weekly drop. It fell to a low of $1,305.69 on Friday - its lowest since October 17.

* A top Federal Reserve official said on Friday the U.S. labour market has recovered enough in the last 14 months to allow the central bank to reduce its bond-buying stimulus.

* Another official said inflation has to be higher before the Fed decides to scale back.

* The Fed's $85 billion monthly bond purchases have burnished gold's appeal as a hedge against inflation, boosting prices, but signs that the bank is nearing a tapering of the purchases have hurt prices this year.

* The U.S. Mint's American Eagle gold coin sales rose to a two-year high on Friday, lifting 2013 sales above the previous year's total and reflecting the consistently strong demand for physical bullion coins among retail investors.

* Hedge funds and money managers broadly raised bullish bets in futures and options of U.S. gold, silver and copper for the week ended October 22, a report by the Commodity Futures Trading Commission showed on Friday.

* For the top stories on metals and other news, click, or

MARKET NEWS

* Asian markets started the week on a sluggish note on Monday, while the euro languished at two-week lows.

(Reporting by A. Ananthalakshmi; Editing by Richard Pullin)

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Mahurat Trading: 5 stocks to buy this Diwali

A new year means a new beginning for many. The calendar year followed by the world indicates 1 January as the start of a new year. However, in a diverse country like India people follow different traditions each year.
For most Hindus, the New Year begins in the summer.  However, in Gujarati and Marwari traditions, it starts in Diwali.
India’s stock markets are dominated by brokers belonging to these two communities.  Hence, every year, Diwali assumes a special place for those in the stock market.

Here are few things to know about Muhurat trading:
·         Stock exchanges would open for trading at 6 pm on 3 November 2013 for Muhurat trading. The session lasts for an hour and a half. Muhurat means an auspicious moment to start something new. This is a tradition for over 100 years on the Bombay Stock Exchange and the mostly Gujarati and Marwari stock broking community. The session marks the end of the traditional financial year and the beginning of the new one.
·         People look at stock markets from a point of view of wealth creation. Stockbrokers execute token trades on behalf of their clients or their own account to mark the occasion. Stock exchanges and broker offices are decorated to seek blessings of Lakshmi, the goddess of wealth.
·         Chopda or Sharda Puja is performed. ‘Chopda’ is an account book. On the New Year day, you close your previous year accounts and start writing your financial statements in a new book. However, since most stock brokers are corporatized, accounts are no longer maintained physically. They are in electronic format. Also, for most companies in the business, the financial year starts on 1 April.
·         Typically, the trading activity on Muhurat trading is thin. Over the years, statistics from the Bombay Stock Exchange data (available since 1992) shows that the Sensex has ended in positive territory 7 out of 10 times. The average gain or loss is not more than one per cent. Transactions mostly have a sentimental value than any impact on the portfolio.

Diwali is the time of the year when investors review their investments. They shuffle the stock portfolio based on their assessment for the year gone by and the road ahead. Various brokerage firms give recommendations for investors.

Here are five stocks most recommended for buying this Diwali:

1.       ICICI Bank:

Target price: Rs 1,195

The second-largest private bank is one of the top picks this Diwali. Deposits are a key method of raising funds for a bank, and are cheaper than borrowing from the RBI. So a high ratio of current and savings account deposits to total deposits (CASA ratio) means the bank is attracting money at very low cost. This increases its profitability. ICICI Bank has the highest ratio among private sector banks. Its overall balance sheet also improved in the July-September quarter despite a slowdown in the economy.

2.       Axis Bank:

Target Price: Rs 1,430

The bank has been increasing its presence in the retail banking segment by attracting more consumers to open current and savings accounts. It has also been consistently delivering better-than-industry growth due to this, according to Religare, a brokerage firm. Also, its asset quality has not worsened significantly in the first half of this fiscal. It has also turned cautious in offering loans on account of uncertain macro-economic conditions.

“Notwithstanding moderate concerns on its corporate book asset quality, we expect the retail business to drive earnings,” Angel Broking said in a report.

3.       Tech Mahindra:

Target Price: Rs 1,830

India is seeing a pickup in exports. IT services exports account for a significant chunk of total exports. With the rupee hovering at 60/$-levels, the IT sector has the most to gain as it earns in dollars and other foreign currencies. Tech Mahindra, the first largest IT company in India post its merger with Satyam, has aggressively acquired deals. This is expected to help post a strong revenue growth. Also, the stock price is currently at attractive levels. “Its growth momentum likely to continue due to the pick-up in discretionary spending and strong deal momentum in the US and some parts of Europe,” Religare said in a report.

Other favourites in the IT space are Wipro and Infosys.

4.       Colgate

Target Price: Rs 1,450

Oral care company Colgate has consistently reported strong volume growth by maintaining an aggressive strategy to reduce competition. This is expected to drive future growth too. Also, changing trends in consumption of tooth paste in rural areas and the power to increase prices without affecting demand are other positive factors for the consumer goods company. “We prefer Colgate India in the fast moving consumer goods (FMCG) space due to a better growth outlook and a better performance on the volume growth, which remains at 9-10% despite intense competition,” Sharekhan said.

Cigarette-maker ITC and Godrej Consumer Products Ltd are other favourites in the space.

5.       L&T

Target Price: Rs 1,130

Despite a slowdown in the Indian economy, analysts are bullish about the infrastructure major L&T. It is expanding its presence outside India, which is now expected to contribute 30% of its total revenues. Even in the domestic front, it has posted a strong growth in terms of winning orders. This shows its ability to withstand a slowdown. “With a healthy order book, strong balance sheet, wide ranging capabilities and international presence, the company is optimistic about its growth,” Religare reported.

This work is produced by Simplus Information Services Pvt Ltd. Customer engagement through content.

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China reform checklist: How to tell that this time it's for real?

By Tomasz Janowski

TOKYO (Reuters) - The message from Beijing could not be clearer: China needs to shift to a more balanced economy that is socially and environmentally sustainable.

That was the conclusion of a key Communist Party meeting a decade ago, yet what followed was more of the same: rapid investment-led expansion, which turned China into the world's no.2 economy, but left it laden with debt, environmental damage and excess capacity.

Fast forward to 2013 and China's new leadership is again promising more harmonious development and the question is how to tell whether, this time, it is for real.

One encouraging sign suggesting that President Xi Jinping, Premier Li Keqiang and their team mean business is their greater tolerance for slower economic growth while they carry out reforms. After three decades of double-digit rises in GDP each year, the leaders have pencilled in 7.5 percent for 2013 - the weakest pace since the late 1990s.

"Since the reforms of the late 1970s, leaders have always without exception said that the growth rate is the first priority," said Zhao Xijun, deputy head of the Finance and Securities Institute at Renmin University in Beijing.

"The new leaders don't say they don't pay attention to growth, but the new priority is the stability of growth rather than a high growth rate."

The new approach was evident earlier this year when investors fretted the economy may be slowing down too much. Rather than adopting the sort of massive economic stimulus of the past, Beijing announced small-scale and targeted measures to support economic activity.

Chinese leaders have repeatedly said China needs to wean itself off a reliance on investment and exports, which in parts of the country have led to industrial overcapacity and pollution, and rely more on services and consumption, more akin to the developed economies of the West.

To do that means encouraging tens of millions of Chinese to move to cities to live while creating a social safety net and laws, particularly on land ownership, that will give them the confidence to do so.

The ultimate test of the new team's appetite for reform will be its actions, but the four-day third plenary session of the Communist Party's leadership starting on Saturday will offer some early clues.

Such meetings have served in the past as launch pads for major economic reforms like those unveiled in 1994 that paved the way for China's World Trade Organization membership, though some, such as the one a decade ago, failed to deliver.

By nature, the pronouncements are broad and often deliberately cryptic, but China watchers believe the tone and level of detail can reveal where the policy focus will be.

"For example, the state owned enterprises' reform will be touched on, but it will probably be in very general language and similar to one used before," said Haibin Zhu, chief China economist with JPMorgan in Hong Kong.

"But in some key areas, like fiscal or land reform they will be using more detailed language."

In the end, what will matter more is what the authorities do in the next six to 12 months. General expectations are that the follow-up will not be as dramatic as in 1994, but also that it will not be a non-event like a decade ago.

The consensus view in Beijing is that the authorities are not ready to take on state-owned giants that dominate sectors such as finance or energy or to let the struggling ones fail.

The focus therefore will be on the rest of the agenda: financial, fiscal, land and government administration reforms, pricing of resources, changes to social security and opening protected sectors to private and foreign competition.

All are seen contributing in one form or another to China's push towards more private investment, consumption, services and high-value manufacturing, so any progress there would be welcome by investors and economists.

"Many of these things hang together and you can't really go the full length on one without another, so any significant step on any of these will be welcome," Markus Rodlauer, deputy head of the International Monetary Fund's Asia Pacific Division in Washington, told Reuters.

What few seem to be advocating is for Beijing to break with its gradual, cautious approach.

"In a way, a gradual move on all of those (reforms) is what will in the end deliver," Rodlauer, who heads the Fund's China mission, said. "China has been well served by its strategy of gradual, careful reforms and does not need nor should it venture suddenly to implement Big Bang reforms."

Of all reforms, a financial overhaul is considered low hanging fruit. Markets and the currency are closely controlled and capital movements in and out of the country are restricted.

Driven by the central bank's governor, Zhou Xiaochuan, the gradual move towards market-driven interest and exchange rates and capital flows liberalisation is already under way and there is a clear roadmap.

In the least, investors expect to see a further broadening of the yuan's trading band next year and the establishment of a deposit insurance scheme - a prelude to a gradual freeing up of deposit rates and full liberalisation of interest rates.

"If we don't see anything on financial reform in 2014, that will be a very big disappointment," said JPMorgan's Zhu.

On the fiscal front, economists and investors will look for steps to share more evenly revenues and expenditure between central and local governments and the expansion of the use of value added tax in the services sector. Local governments now get about half of tax and other revenues, but are responsible for more than 80 percent of public spending.

Economists and observers will also look for progress towards a bilateral investment treaty with Washington and a similar pact with the European Union as proof of Beijing's intention to further open up its economy.

Some also expect to see land and residence registration reforms tested in some areas, translated into a nationwide policy that would support China's stated goal to boost its urban population.

By contrast, a proliferation of pilot schemes, such as the Shanghai Free Trade Zone trumpeted as a laboratory for sweeping financial market reforms, could signal a lack of political consensus to roll out the changes on a national scale.

Economists say some caution is understandable given many of the reforms mean handing over controls to market forces and coming months will show how quickly the authorities want to go.

But given no one knows how much time China has before its debt pile up, industrial overcapacity, environmental degradation and social tensions prove hard to control, erring too much on the safe side may be risky too.

"We don't know how much time Beijing has and we don't know whether the incremental approach they've used in the past is still possible," says Gudrun Wacker, a China policy specialist at German Institute for International and Security Affairs, a Berlin-based think tank.

"I believe they will spend the next five years trying to manage the problems and not do anything drastic, but it's like reading from tea leaves." (Tomasz Janowski, Asia Economics Correspondent; Additional reporting by Kevin Yao in Beijing; Editing by Neil Fullick)

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Markets closed on Monday for public holiday

MUMBAI (Reuters) - Indian stock, debt and currency markets are closed on Monday for a public holiday. Trading will resume on Tuesday.

The BSE Sensex rose 0.2 percent on Friday, after earlier hitting a record high of 21,293.88 points, which surpassed the previous record set on January 10, 2008. The broader Nifty rose 0.1 percent.

The benchmark 10-year bond yield closed 8 basis points higher at 8.70 percent, while the partially convertible rupee closed at 61.74/75 per dollar compared with 61.50/51 on Thursday.

(Reporting by Mumbai markets team)

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Banks hope futuristic flagships can tempt new customers

By Lionel Laurent

VELIZY, France (Reuters) - Installation art, interactive walls and a robot doorman; the flagship branches of the world's top banks have come a long way from the iron grilles and potted plants of old.

To compete against online-only rivals and to attract a new generation of customers to branches, banks are installing sleek interiors and hi-tech gadgetry.

ATMs that read fingerprints, touch-screen desks to flick through your finances and videoconference units for expert advice are all on display at payments-technology firm Wincor Nixdorf's showroom in the Paris suburb of Velizy.

"Banks are investing a lot in their retail branches," said Steve Bousabata, head of Wincor's French banking services arm. "They want customers to come back."

The reason is clear: after years of relying on branches to drive retail revenue, European banks expect such networks to supply only 62 percent of sales by 2020 from today's average of 81 percent, according to Equinox Consulting.

Banks, especially those still nursing losses from the financial crisis, are under pressure to cut costs and are balancing the need to pare back branch networks by sprucing up select outlets.

But branches are still the first point of contact for many customers and are still the primary location for product sales like mortgages, new accounts and insurance, underlining the importance of upgrading them for a more tech-savvy generation.

The difficulty is knowing exactly what belongs in the branch of the future and what is better left behind.

"Are all the things we see in branches today going to be seen in branches tomorrow? I very much doubt that," said Mike Baxter, head of management consultancy Bain's Americas Financial Services practice.

"There's an awful lot of experimentation of stuff that turns out to be unsuccessful and uneconomic."

Flashy "bank of the future" branches mixing gadgetry with design similar to Apple's minimalist stores have been opened by BNP Paribas in Paris, Barclays in London and Deutsche Bank in Berlin - at an estimated cost of 5 million euros each.

They include lounge areas, giant interactive screens and other trimmings such as handbags for sale and pieces of art.

Gauging their success is tricky. BNP was willing to give data on its refurbished flagship branch near the Paris Opera - which three years ago was fitted with a wall covered in plants, iPads for customer use and a touch-screen desk - saying that footfall was up 40 percent and new clients up 25 percent.

Italy's Unicredit also said that footfall and new business were up at its newly revamped flagship branch in the Bulgarian capital of Sofia, which offers "welcoming scents" and a touch-screen wall. Visits are up by an average of 60 percent while loans and deposits have doubled, a spokeswoman said.

On the other hand, BNP has done away with some ideas that failed to click with consumers: it has scrapped the iPads and touch-screen desk in favour of an interactive wall.

Deutsche Bank and Barclays declined to give data on single branches.

More broadly, some 88 percent of bank executives view their flagship branches in main street areas as being "successful" in promoting brand awareness, according to a survey by Equinox.

ROBOT BANKERS

Beyond Europe, the experiments are even bolder.

In South Korea, where mobile banking has flourished faster than in the West, Hana Bank allows mobile users to transfer money to one another by physically "bumping" smartphones. Shinhan Bank has also introduced unmanned "smart" branch kiosks that communicate with handsets.

Commonwealth Bank of Australia is using a mobile app to drive mortgage sales by offering clients data on houses for sale, while BBVA's U.S. unit Compass is testing drive-through ATMs with videoconferencing.

Customers of the Washington D.C. branch of Carolina Premier Bank will soon find themselves face-to-face with a robot, which will greet visitors from November 15.

Although some of these advances may prove too gimmicky or not functional enough to catch on, long-distance banking via videoconference is seen as a way to reduce branch staffing without hurting service, though customers still prefer a physical point of contact somewhere along the line.

"Mortgage specialists sitting at headquarters, connecting via videoconference to the relationship manager; that works," said Bain's head of global retail banking, Dirk Vater.

"But bank-to-consumer, with people sitting on the sofa using Skype and Facetime, has not been adopted yet. It will eventually ... But not yet."

Increased ATM functionality as used by Citibank Asia and more secure biometric readers are also promising, he added.

The ultimate question of whether to scrap the branch entirely is one that is not being considered, consultants said.

The preference is for a "hub-and-spoke" model that pools resources in urban areas and reduces smaller, rural branches.

While this may lead to more ambitious flagship outlets, it can create gaps for new competitors to fill: France's Nickel, which offers a low-cost current account, is creating a branch network with the country's 27,000 tobacconists.

"Even in developed markets, the death of branches is somewhat exaggerated," Ernst & Young wrote in a 2012 report.

"We will see further evolution of the branch experience from something that looks like a local government office ...(to) a hybrid between coffee shop and technology store." (Additional reporting by Steve Slater in London, Tsvetelia Tsolova in Sofia, Jackie Range in Sydney and Douwe Miedema in Washington; Editing by Carmel Crimmins and Giles Elgood)

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Investors pour $54.2 billion into equity mutual funds - TrimTabs

REUTERS - Investors poured some $54.2 billion into all equity mutual funds and exchange-traded funds in October, the third-largest inflow on record, data from TrimTabs Investment Research showed on Sunday.

All three of the largest monthly inflows into all equity funds have occurred this year, and this year's inflow of $286 billion into all equity funds is the biggest since 2000, TrimTabs added.

"When fund investors are as upbeat as they are now, a short-term pullback would not be a surprise," said David Santschi, chief executive officer at TrimTabs Investment Research.

Fund Investors keep dumping bonds, however. Bond funds posted five consecutive monthly outflows for the first time since late 2003.

Outflows have picked up even though the average fund was up 1.3 percent in September and 0.9 percent in October, TrimTabs said. Bond mutual funds and ETFs redeemed $13.5 billion in October, almost triple the outflow of $4.9 billion in September, the firm noted.

"We cannot emphasize enough how much recent outflows mark a dramatic shift for the fixed-income world," Santschi said. Bond funds have not posted five consecutive monthly outflows since August 2003 to December 2003, TrimTabs said.

New offerings surged to $23.6 billion in past two weeks, and Dealogic reports $4.3 billion already scheduled for this week, according to the research.

The U.S. economy slowed in October, while real wages and salaries climbed a scant 0.5 percent year over year, the researched showed.

TrimTabs said its demand indicators suggest the U.S. stock market may struggle to move much higher over the short-term but that the longer-term uptrend is secure.

While the S&P 500 is up 23.5 percent year-to-date, TrimTabs said its indicators do not point to a major sell-off anytime soon.

TrimTabs said its Demand Index stood at 77.9 on October 30, up a bit from 73.6 a week earlier (readings above 50 are bullish).

Although the index did not rise much, TrimTabs said it managed to clear the 75 threshold.

The short-term outlook is a lot less favorable, TrimTabs said, noting exchange-traded funds flows suggest stocks will have a tough time moving much higher.

Inflows into leveraged short exchange-traded funds stopped in the past week, which is a cautionary sign from a contrarian perspective, TrimTabs said. (Reporting by Scott DiSavino and Jennifer Ablan; Editing by Maureen Bavdek)

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