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British Airways owner IAG remains a UBS 'buy' despite turbulence caused by the coronavirus

The Swiss 'house' reckons Lufthansa and Air France have the greatest exposure to Asia

International Consolidated Airlines Group -

British Airways owner IAG (LON:IAG) looks likely to ride out the market turbulence created by the coronavirus, according to UBS, which assessed the impact of the outbreak on airline stocks.

Germany’s Lufthansa (ETR:LHA) and Air France have the greatest exposure of the European carriers to China and wider the Asia region, where travel plans may be hit by the lockdown of the Wuhan, the city at the centre of the potential pandemic.

The current bumpy ride notwithstanding, UBS has maintained its ‘buy’ recommendation on Lufthansa, as it has IAG. The latter is worth £7 a share, the Swiss house reckons.

Shares in the UK flag carrier were down 5.8% in late morning trade at 585.2p. The German carrier’s stock descended 4%.

UBS also appeared happy to repeat its ‘buy’ on Ireland’s budget airline Ryanair (LON:RYA), whose shares were dragged 2% lower despite having little or no exposure to Asia.

Rival easyjet (LON:EZJ) remains a ‘sell’ down to £12.75. While being a “best-of-breed low-cost operator”, the valuation remains “stretched”, according to UBS. The shares were trading 4.7% lower late morning.

The pressure on the international airlines reflected the fear travel in an out of Asia may be severely curtailed by the coronavirus.

The yardstick being used was the 2003 SARS outbreak, which wrought huge economic damage to the region.

Worries over the growing problem were contagious as 190 points were wiped from the FTSE 100, with IAG and business hotel chain InterContinental (LON:IHG) – down 6.3% - leading the losers’ list.

Also under pressure were shares in cruise operator Carnival (LON:CCL) – off 5.4% - and Prudential (LON:PRU), the Asia-focused insurer, which lost 5.3%.

The miners, which rely heavily on fast-growing China for business, were friendless.

Quick facts: International Consolidated Airlines Group

Price: 240.015 GBX

Market: LSE
Market Cap: £4.77 billion

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