BHP share price is at risk of a breakdown after dividend cut

August 22, 2023 10:00 AM AEST | By Invezz

BHP share price is at risk of a breakdown after dividend cut — Image source: Invezz

China risks rising

BHP and other mining companies are facing major headwinds as China’s economy shows some signs of slowing down. Recent economic numbers have shown the risks facing the Chinese economy.

Exports and imports have dropped sharply in the past few months. Mining production remains deeply in the red while retail sales and fixed asset investments have tumbled. Similarly, the youth unemployment rate has soared, forcing Beijing to pause publishing the report.

At the same time, China’s key sectors are seeing slow growth and black swan events. For example, Country Garden, one of the biggest firms in the industry has defaulted on its financial obligations. This is a sign that the real estate bubble is bursting in the country.

China also expanded rapidly due to its huge infrastructure projects. Now, the country has run out of things to build, with many local governments being cash-strapped.

All these factors mean that demand for commodities that BHP sells will be a bit low for a while. These commodities include copper, iron ore, and nickel. The most recent results shows that the company’s profit dropped by 58% in the first half of the year to $12.9 billion. Revenue slumped by 17% to $53.8 billion.

As a result, the company decided to slash dividends in a bid to conserve cash as the company faces substantial headwinds. This is notable since most BHP investors do so because of its safe payouts, which provide regular income,

Therefore, fundamentally, there is a likelihood that the BHP stock price will remain under pressure.

BHP share price forecast

The daily chart shows that the BHP stock price has been under pressure for a while. This pressure started when the shares found substantial resistance at ~A$47.6 between February and July this year. The stock has already crossed the 200-day and 50-day moving averages, signaling that bears are in control.

BHP shares are sitting at an important support level, where they struggled to drop since March. Therefore, I suspect that the stock will continue falling as sellers target the key support level at A$40. The stop-loss of this trade is at A$45.

The post BHP share price is at risk of a breakdown after dividend cut appeared first on Invezz.

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