STOCKWATCH: Johnson Electric lower on U.S. economy/MSCI concerns

HONG KONG (AFX-ASIA) - Johnson Electric shares were lower in early morning trade as concerns over the economy of the U.S., the major market for the motor maker, remained prevalent, dealers said.



          They said investors are also worried about a possible reduction of the stock's weighting in the new free float adjusted MSCI indices tomorrow as Johnson Electric's free float is only about 40 pct.



           At 10:45 am, Johnson Electric was down 0.40 hkd at 14.55 on trade of 1.71 mln shares, while the Hang Seng index was down 176.00 points at 13,461.87 on turnover of 1.89 bln hkd.



          "The slowdown in the U.S. economy is still haunting Johnson Electric ... It is hard to maintain the current high earnings/price multiple amid uncertainty over its fundamentals in the near term," an analyst with South China Securities said.



          The stock is trading at a PE multiple of about 50 times.



          The analyst said investors locked in profit by taking advantage of the latest gains in line with the broader market.



          "Another concern is the adjustments in MSCI indices. The low free float of Johnson Electric is expected to reduce the weighting of the stock in the MSCI indexes by about 1 percentage point," the analyst said.



          MSCI is scheduled to release its new free float adjusted indices tomorrow.



          "To index the MSCI adjustments, fund managers may continue to unload their holdings in Johnson Electric," the analyst said.



          However, in the long run, the analyst said he remains optimistic about Johnson Electric's outlook.

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