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Coronavirus fears smack financial markets. This is what I’d do now

It’s no surprise to see risk sentiment dive on Monday. The tragic coronavirus outbreak in China continues to dominate the newswires, with the infection count rising (sadly, there are now almost 3,000 confirmed cases) and authorities struggling to contain the outbreak.

Investors are taking flight the world over, markets are firmly in the red, and the FTSE 100 was last down 140 points. Back below 7,500 points and trading at its cheapest for five weeks, it’s possible many investors have booked profits after recent strength too.

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Gold gains

Share markets might be on the retreat, but gold is back on the charge. This isn’t exactly a shock either, the safe-haven asset living up to its reputation as the place to be in times of geopolitical and macroeconomic turmoil.

Bullion’s trading around the $1,580 per ounce marker and moving back towards early January’s seven-year highs. So buying gold, or shares in gold producers, could prove to be an excellent idea right now. Russian bullion miner Polymetal International was one of only four FTSE 100 stocks to have risen on Monday, underlining the terrific investment potential of such a commodities play.

Prepare to buy the dips

Footsie-quoted utilities company National Grid has also risen today. But could it be a mistake for investors to focus just on classic safe-haven investments?

Warren Buffett famously suggested that we should “be fearful when others are greedy and greedy when others are fearful.” And investors are often fearful. In the spirit of Buffett’s advice, I think investors should keep their chequebooks out in readiness for dip-buying opportunities, of which there should be many this year given not only current problems but issues such as Brexit and trade spats globally.

Brilliant bargains

For now, Monday’s fierce selling certainly leaves plenty of cheap-looking shares on the FTSE 100 alone. Airline shares can be very sensitive to general news flow and it’s no surprise that they’ve taken a hell of a whack on concerns over travel restrictions. British Airways and Iberia owner IAG, for instance, deals on a P/E multiple of just 6 times for 2020. Compare that with the broader Footsie prospective average of 14.8 times.

Insurance specialist Prudential, which generates the lion’s share of profits from Asia, has also suffered badly at the start of the week, a fall which leaves it dealing on a forward P/E ratio of 9.5 times. And banking colossus HSBC deals on a multiple of 10.5 times and boasts a 7% dividend yield. 

It’s quite possible further falls could be around the corner, though these are firms whose medium-to-long-term outlooks are exceptional, at least in my opinion. They therefore they look like terrific buys at current prices.

We can only watch the events in China and hope that the virus can be contained. I, for one, am not panicking and selling off my share-holdings. And I don’t think that you should either. Stay the course and be prepared to buy, I say.

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Royston Wild owns shares in Prudential. The Motley Fool UK has recommended HSBC Holdings and Prudential. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.