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BHP Billiton plc, Centrica PLC And Standard Chartered PLC Are Are Being Crushed By China Woes

The latest efforts of the hapless Chinese authorities in urging the country’s main state pension fund to buy shares and prop up its ailing stock market have been to no avail, as the Shanghai Composite lost a massive 8.5% today. That’s hit European markets hard, with the FTSE 100 down 339 points (3.9%) to 5,849 by mid afternoon — and who’d have thought a few short months ago that we’d see the FTSE dropping below 6,000 again?

The FTSE fall has hit companies across a range of sectors, with the mining industry being the hardest hit by falling Chinese demand due to slowing growth (although there are plenty of countries that would love to be growing their economies by only 7% per year).

BHP Billiton (LSE: BLT) is due to report its full-year results on Tuesday, but that’s been overtaken by the latest panic as it falls along with Rio Tonto and Anglo American. BHP shares are down 83p (7.8%) on the day to 966p as I write, taking their 12-month decline to 41%, as the Australia-based producer of iron ore, potash, copper and other commodities relies on the Asia region for around two thirds of its annual turnover — in 2014, China alone accounted for more than a third.

Cheap iron

The iron ore price has fallen from nearly $190 per tonne in February 2010 to only around $50 today, with the mini-recovery that started in May coming crashing back down again — and I’d say it’s likely to fall further.

Energy producers are feeling the pressure too, with BP and BG in the FTSE 100’s top 10 fallers, and the fallout is hitting suppliers like Centrica (LSE: CNA), too, whose shares have lost 6.2% to 241p. That’s a 19% fall in 12 months, and a dip of 33% since a recent high in September 2013. The big question over Centrica is whether the share price fall genuinely represents the extent of the firm’s business troubles in this tough couple of years, and if that might impact on its all-important dividend.

Despite an expected cut in the dividend there’s still a 4.7% yield forecast for 2015 at the moment, assuming a further 7% fall in earnings. That would be covered 1.5 times and would make the shares attractive at today’s price, assuming there’s no further cut needed — there’s a realistic chance it might not match expectations, but I think there’s enough safety margin to make Centrica the least risky of these three stocks today.

Struggling bank

I would definitely not say the same about Standard Chartered (LSE: STAN), which has been suffering from under-performance for some time of its own accord. The new management has barely had time to make changes, and now the latest Chinese crisis is taking its toll on top of that — the shares are down 6.4% to 730p today, having plummeted by 36% over 12 months and by 54% since March 2013.

While forecasts suggest a 2016 P/E of under 10 for Standard Chartered, I expect that to be downgraded in the coming months, and I’d steer clear for now.

On the bright side, we could be heading into a great time for recovery investors, and the sectors that are being hit today by short-term sentiment will surely reward investors in the longer term. Picking the bottom is pretty much impossible, but if you have money to invest then dripping it into shares over the coming months could prove to be a good move.

Despite the dips, long-term investing in top FTSE shares is a strategy that has brought great long-term rewards for a century and more.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Centrica. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.