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Ebola Scare Grounds Airline-Related ETF

After U.S. health officials announced the first confirmed Ebola patient who flew to Dallas from Liberia, transportation-sector exchange traded funds plunged Wednesday, with airline stocks under heavy pressure.

While there are no longer any airline-specific ETFs on the market, the iShares Transportation Average ETF (IYT) and the SPDR S&P Transportation ETF (XTN) both provide airline industry exposure without the commitment or risks of a single stock. IYT has a 13.9% allocation toward airliners while XTN includes a 23.5% weight in airlines. IYT dipped 2.5% Wednesday while XTN fell 2.9%. Year-to-date, IYT has increased 15.1% and XTN gained 14.8%.

United Continental Holdings (UAL) led the drop among major airlines, falling 2.8% Wednesday. UAL makes up 3.4% of IYT’s portfolio and 2.4% of XTN.

Among U.S. airliners, United Continental has the largest exposure to Africa through its Star Alliance, CNN reports.

“I think it’s a general concern that people are going to start traveling less if this gets worse,” Joe DeNardi, a Stifel Nicolaus analyst, said in the article. “There’s no discrimination between international and domestic.”

While only a handful of U.S. flights go in and out of Africa, Denardi points out that it is up to passengers to back off from flying for fear of exposure to any danger diseases, Bloomberg reports.

The Bloomberg U.S. Airlines Index, a gauge of all 11 U.S. carriers fell as much as 3.9% Wednesday.

Hunter Keay, a Wolfe Research & Co. analyst, also noted that airline shares only rose nine days over September and any positive momentum supporting the sector “has gone away.” due to a drop in fares across international markets.

Investors and U.S. citizens may be blowing the Ebola scare out of proportions. Keay reminds investors that “there is really no clear direct threat as it relates to U.S. airlines” since the spread of Ebola has largely been isolated to west Africa.

“There is no contamination risk as the patient has only developed symptoms several days after his arrival in the U.S.,” Wencke Lemmes, a spokesman, said in the Bloomberg article. “This means that if ever this person would have been on board of our flight, what we cannot exclude but not confirm either, there has never been a risk of contamination.”

SPDR S&P Transportation ETF

XTN_ETF
XTN_ETF

For more information on the transportation sector, visit our transportation category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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