Lacklustre start for KLCI but Digi and Axiata up on merger talks

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KUALA LUMPUR (May 7): The FBM KLCI got off to a lacklustre start this morning in line with the slip at regional markets, while telco giants Digi.Com Bhd and Axiata Group Bhd were in focus on confirming they were in talks for a merger.

At 9.05am, the FBM KLCI was down 1.98 points to 1,630.82.

The top losers included Carlsberg Brewery Malaysia Bhd, Lingkaran Trans Kota Holdings Bhd, Tenaga Nasional Bhd, Aeon Credit Service (M) Bhd, Public Bank Bhd, Tomypak Holdings Bhd, Hong Leong Bank Bhd, Press Metal Aluminium Holdings Bhd and Hong Leong Fnancial Group Bhd.

Among the gainers in focus were Digi.Com  Bhd and Axiata Group Bhd on news that Digi's largest shareholder, Norway-based Telenor Group, are in discussions with Axiata regarding a potential non-cash combination of their telecom and infrastructure assets in Asia. Digi said the proposed merger will be done via a new merged entity (MergedCo), in which Telenor would take a majority stake.

Asian stocks fell with U.S. futures after President Donald Trump’s top trade negotiator said the U.S. plans to proceed with a tariff hike on Chinese goods on Friday. The Chinese yuan dipped, according to Bloomberg.

Korean and Japanese shares slid as both markets came back online after holidays. The drop in Tokyo was still relatively modest after Japan was shut for six trading days, perhaps helped somewhat by a relatively muted climb in the yen amid the renewal of trade-war tensions. Treasuries climbed, along with Japanese government bonds, in the wake of U.S. Trade Representative Robert Lighthizer’s confirmation of the planned tariff increase. Indications that China will still send a delegation to Washington this week had helped temper declines on Wall Street, with the S&P 500 closing off of its lows of the session Monday, it said.

Kenanga IB Research said Asian markets dived as investors’ turned fearful of a collapse in trade negotiations between US and China.

It said back home, the FBMKLCI fell 4.50 points or 0.27% to close at 1,632.80, recovering from a low of 1,623.61.

“The primary downtrend of the index is still intact as all shorter-term SMAs are trading below longer-term SMAs.

“Given lacklustre momentum indicators and RSI which is still above oversold level, we believe that there could be further downside.

“Should buying momentum emerge, the index is likely to head to 1,660 (R1), where a break above would see it head towards the 1,700 (R2) level. Conversely, support levels can be identified at 1,615 (S1) and 1,600 (S2),” it said.