KLCI weighed down by retracement, Axiata

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KUALA LUMPUR (June 1): The FBM KLCI fell 2.76 points or 0.2% to 1,763.11 points on profit taking yesterday, and as Axiata Group Bhd shares dipped amid confusion over Axiata unit Ncell's 4G launch in Nepal after news reports claimed Nepal had barred Axiata unit Ncell from launching the service there.

At Bursa Malaysia, Axiata shares fell 23 sen to RM4.85 at 5pm to become the bourse's third-largest decliner.

Across Bursa Malaysia, 2.22 billion shares worth RM2.24 billion were traded. Decliners outpaced gainers at 505 to 414 respectively.

On Axiata, AmInvestment Bank Bhd analyst Alex Goh said Axiata announced its 80%-owned Nepal-based NCELL has launched 4G services and made available from today onwards in the Kathmandu Valley, including Nagarkot, Banepa and Dhulikhel. The service, said Goh, is being launched in line with the technology neutrality permission granted by the regulator, Nepal Telecommunications Authority (NTA) earlier this month.

"This is contrary to news reports that Nepal’s parliamentary Public Accounts Committee (PAC) had recently directed the NTA to prevent NCELL from launching 4G services until the settlement of an ongoing dispute over capital gains tax (CGT).

"This directive was issued without holding a meeting with members of the PAC, as most of these lawmakers were in their home districts to prepare for the second phase of local elections scheduled for June 14. The PAC had decided to issue the directive after the telecom sector regulator disregarded its previous instruction to prevent NCELL from expanding 4G network," noted Goh.

Newspapers, Goh went on to say, had reported that the NTA would abide by the fresh directive issued by the PAC and bar NCELL from launching the 4G service.

Amid the confusion, Goh said additional one-off regulatory costs and potentially operational disruptions may arise for NCELL, and so he expects "further earnings uncertainties in Axiata’s overseas divisions coupled with the struggles in regaining subscriber momentum for Celcom to drive the path towards re-merger with TM".

Meanwhile, the KLCI saw retracement today. Etiqa Insurance and Takaful research head Chris Eng told theedgemarkets.com that “the KLCI underperformed peers due to an expected retracement from yesterday’s last minute push up.”

Across Asian share markets today, Japan's Nikkei 225 climbed 1.07% while Hong Kong's Hang Seng rose 0.58%.

Reuters reported that the sterling retreated on Thursday on fears that Prime Minister Theresa May could lose control of Parliament in Britain's June 8 election, while conflicting signals on the health of China's manufacturing sector kept most Asian stock markets in check.