STOCKWATCH: Johnson Electric sharply higher on follow-through buying

HONG KONG (AFX-ASIA) - Johnson Electric Holdings Ltd shares were sharply higher in morning trade on follow-through buying after heavy losses for most of last week, with some position-squaring also supporting the stock, dealers said.	    But the sharp gains may result in profit-taking in later sessions, they added.	    At 10:51 am, Johnson Electric was up 0.60 hkd or 5.04 pct at 12.50 hkd on volume of 3.64 mln shares.	    The Hang Seng Index was up 164.76 points at 12,748.12.	    Celestial Asia Securities director Josephine Hui said she expects the stock to experience continued volatility in the coming sessions.	    "There were no significant reasons for the rally. Some players are now saying the U.S. economic outlook is turning better, supporting shares like Johnson Electric with a significant earnings portion generated from the United States," she said.	    Hui said the company's current P/E ratio remains very high, so further upside in the stock should be limited.	    "The company's P/E ratio has a historical high of 44 times, while it has a one-year P/E multiple of 35, a two-year of 29.5," she said.	    Louis Tse, executive director with Standard Capital Brokerage, said some position-squaring sent the counter higher today.	    "There were no other special reasons for the rally in the counter other than positions-squaring. Merrill Lynch and ABN Amro are still dumping the shares," Tse said.	    He said the stock faces initial resistance at around its 20-trading-day average level of 12.82 hkd.	    "The counter tested 12.80 hkd in the morning, but it fell quickly from that level. If it breaches 12.80 hkd, it could test higher at around 13.95-14.00 hkd in the medium term," he said.	    Support is seen at 12.00 hkd, he added.	    The major concerns for the company lie with its automobile component business, with its major exports targeted for the U.S. and European markets, dealers said.	    The company's business development will mostly be governed by the U.S. economic outlook, which remains sluggish and uncertain at the moment, they added. 

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