China’s stocks defy Brexit turmoil as coal, steel shares advance

Shanghai - Mainland Chinese stocks advanced the most among emerging markets in Asia, with energy and materials companies pacing gains after policy makers said they will reduce overcapacity in the coal and steel industries.

The Shanghai Composite Index added 0.9% at the mid-day break. China Shenhua Energy Corporation climbed to a seven-week high after the head of the National Development and Reform Commission said the nation will cut coal capacity this year by about 7.5% to curb pollution and eliminate so-called "zombie" companies in the struggling industry.

Angang Steel Company rose the most in nearly four months after the NDRC said it also plans to shed 45 million tonnes of steel capacity this year. The ChiNext index of small-company shares added 1.7%.

The advances in mainland equities contrasted with losses in most other Asian markets after the UK’s vote to leave the European Union increased anxiety among investors around the world.

The markets have overreacted to the so-called Brexit and need to calm down, China’s Finance Minister Lou Jiwei said in Beijing over the weekend.

"China-specific companies that are not too related to Brexit, such as the steel and coal sectors, should be beneficiaries," said Hao Hong, chief China strategist at Bocom International Holdings in Hong Kong.

"Product prices in the two sectors are already oversold, so any surprise cut in capacity can lead to an increase in prices."

The Shanghai Composite was at 2 878.76 as of 11:30 a.m. local time. The CSI 300 Index advanced 0.8%, with gauges of consumer-staples and energy companies rising at least 1.6% among industry groups.

The MSCI Emerging Markets Index fell 0.7%, while the Hang Seng China Enterprises Index of mainland companies traded in Hong Kong lost 0.5%.