Stocks surge to 7-year high as investors see good in bad news over China exports slump

China's exports and imports both fell sharply last month, sparking concern about the health of the world's second-largest economy, although the slip failed to prevent the stock markets from posting another day of frenzied rises.

The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong increased 4.3 per cent, extending a rise for the eighth day. The Shanghai Composite Index touched a seven-year high with a gain of 2.2 per cent. Hong Kong's Hang Seng index closed 2.73 per cent higher.

"There's a decoupling of the performance of the micro-sectors from the macroeconomy. When the economy is in bad shape, it's like great waves lashing the beaches - the victor becomes a king, while the weak loses the game," said Wendy Liu, head of China equity research at Nomura.

The stock market surge had been mainly driven by a flood of funds hunting for undervalued stocks, she said.

Despite challenges for mainland companies in reaping profits, their operating efficiency might eventually improve as costs were slashed, she said. "Usually the stock market bottoms out when profits sink to the lowest," she said.

Exports slumped 15 per cent in March from the same month a year earlier, falling to US$144.6 billion after jumping nearly 50 per cent in February, with the volatility partly amplified by seasonal factors.

Imports dropped 12.7 per cent to US$141.5 billion. Such double-digit falls in both exports and imports in the same month last occurred in 2009, when slumping external demand dealt heavy blows to China's economy.