Why BHP Billiton Limited’s share price is getting hammered today

Credit: Lucas Walters

Shares of global mining giant BHP Billiton Limited (ASX: BHP) have fallen another 2.8% today to just $16.67, after hitting a low of $16.53 earlier. The fall comes after a very volatile night for the miner’s London-listed shares, which plunged as much as 7% before ending the session 4.9% lower.

Fellow iron ore miners Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG) have also fallen 2% and 2.5% respectively, compared to a 0.5% decline for the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).

So What: Although BHP Billiton’s shares were showing some signs of a potential rebound late in December, they have since fallen every day this week and are once again hovering near their lowest price in a decade.

BHP Billiton’s shares have come under renewed pressure as a result of crumbling commodity prices and concerns regarding Chinese growth following weaker-than-expected manufacturing data earlier this week.

Overnight, the iron ore price retreated 0.5% to US$42.91 a tonne, according to The Metal Bulletin, while Brent Crude oil was slammed 5.5% to trade at US$34.38 a barrel. According to The Australian Financial Review, it’s the first time the resource has traded below US$35 since 2004.

Now What: BHP Billiton is one of the most-widely held shares within Australian portfolios, largely due to its sheer size, its diversification and its fully franked dividend yield. While many would argue that now is the time to buy its shares considering they are trading near their lowest price since 2005, further falls are entirely possible.

Indeed, some analysts expect oil prices to fall to around US$20 a barrel – implying a drop of more than a third from its current prices – while iron ore is also tipped to give up some of its more recent gains to trade below US$40 a tonne.

The outlook is by no means ‘bright’ in the resources sector and, although BHP Billiton has the capacity to weather the storm, it certainly doesn’t look set to thrive in it either. When it comes to buying BHP shares, I’m remaining on the sidelines for now and focusing my attention elsewhere in the market.

Don't miss your chance to "invest like a Pro"...

Motley Fool Pro -- our most comprehensive and innovative ASX investment service -- will reopen for a brief time, to accept new members. That means you've got the chance to follow along as one top investor puts $1,000,000 of The Motley Fool's own money to work...all in ASX stocks. And you're invited to watch everything that goes into our decision -- 100% FREE! Click here to step inside for an exclusive look around - it's FREE!

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.