MENU

2 reasons why the BHP Billiton Limited share price crashed again

Shareholders of BHP Billiton Limited (ASX: BHP) enjoyed some reprieve on Wednesday when their shares rose an impressive 5.6%, but that relief didn’t last long. The shares are back trading at just $16.52, down almost 3% today, and are once again threatening to fall to a new 10-year low.

There are a couple of reasons why BHP’s shares might be falling so heavily today, aside from the obvious fact that the broader S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has also fallen 0.5% with many blue chip shares sitting in the red for the session.

The first reason could be the 0.8% decline in oil prices overnight which has Brent oil now changing hands for US$37.09 a barrel. The Australian Financial Review highlighted that this is within US$1 of its 2004 low, while a number of economists expect it to continue falling.

Unlike oil, the iron ore price rose overnight to US$39.43 a tonne. The problem is, the relief isn’t expected to last long with Goldman Sachs revising its forecasts for the commodity. It expects it to trade for less than US$40 for the next three years and to average just US$35 a tonne in 2017 and 2018.

To top it off, the investment bank cut its price target on the ‘Big Australian’s’ shares by 25% to $18. The Fortescue Metals Group Limited (ASX: FMG) share price also fell 5.2%, while Rio Tinto Limited’s (ASX: RIO) shares dropped 3%.

While some investors are no doubt tempted to buy BHP’s shares at their current price, there could still be further falls to come. Personally, I’ll likely be holding off for a while yet before I hit the “buy” button.

Why These 3 Blue Chip Shares Look Set to Soar in 2016

Forget BHP Billiton -- discover The Motley Fool's top 3 blue chips for 2016. These 3 "new breed" shares pay fully franked dividends AND offer the very real prospect of significant capital appreciation. Simply click here to gain access to this comprehensive FREE investment report.

No credit card required

Motley Fool contributor Ryan Newman has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. You can follow Ryan on Twitter @ASXvalueinvest.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.