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O’Neill would rather add to his squad than lose anyone as he begins his second spell in charge this season after Wilfred Nancy was sacked just eight games into his tenure.
Reports had indicated that Celtic were in talks with Birmingham about including Kyogo on loan, but City coach Chris Davies said on Thursday that he expected the Japanese striker to remain with the Championship club.
Asked if the 30-year-old Japanese striker could return, O’Neill replied: “I was going to say it’s probably unlikely. I think those reports are a bit premature.
“I think there is a view that he really wants to prove himself at Birmingham, which is not surprising.”
Kyogo has only scored one goal since signing for City in the summer after six unhappy months with Rennes following his January exit from the Scottish champions, for whom he scored 85 goals in 165 appearances.
He started the 3-0 defeat to Watford, but returned as a substitute in the 3-2 defeat to leaders Coventry City at the weekend.
Asked about a possible Celtic exit, Davies said: “We haven’t had any discussions at the moment about anything other than Kyogo doing his best and doing his best for Birmingham City.”
“Kyogo is our player, who has played more games recently than he has in the last few months. Personally, I think he will stay here and probably fight through whatever comes before him.”
While he admitted that he expects a lot of transfer activity inside and outside the club this month, he added: “Certainly, at this moment, Kyogo is an important player in the team and will continue to be so.”
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