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By Bloomberg

Chinese stocks climbed for the 11th time in 12 days, led by energy and industrial companies, after oil prices surged and the government said it will promote industries including machine tools and transport equipment.

Offshore Oil Engineering Co. jumped 10 percent after the State Council added the marine engineering equipment industry to its development plans. PetroChina, which is releasing earnings Thursday, gained 5.8 percent as crude headed for its biggest five-day gain since 2009. Beijing HualuBaina Film & TV Co. and Guangdong Qtone Education Co. sank 10 percent, pacing losses on the ChiNext index of small-cap shares, which slid 3.9 percent.

The Shanghai Composite Index gained 0.6 percent to 3,682.10 at the close. The gauge has climbed 11 percent in March. The measure on Wednesday halted a 10-day rally that was fueled by speculation the government will take steps to shore up faltering economic growth.

The CSI 300 Index added 0.2 percent. Hong Kong’s Hang Seng China Enterprises Index lost 0.4 percent at 3:43 p.m., while the Hang Seng Index slipped 0.2 percent. The Bloomberg China-US Equity Index retreated 1.2 percent in New York on Wednesday.

A measure of energy stocks in the CSI 300 rose 3.6 percent, the most among the 10 industry groups. Shaanxi Coal Industry Co. gained 7.1 percent. U.S. oil jumped 4.5 percent by 12:28 p.m. in Tokyo, taking its advance since March 19 to 17 percent, as Saudi Arabia and its allies started bombing targets in Yemen.

Leshi Internet Information & Technology Corp., which is planning to develop electric vehicles, slumped 10 percent, paring gains over the past year to 111 percent. Aberdeen Asset Management fund manager Nicholas Yeo said in an interview last week there’s a bubble in small-cap stocks.

Smallcaps Slump

“Small-caps have already jumped a lot in recent months and there’s also some speculation about a regulatory probe into small-cap trading,” said Wang Zheng, the Shanghai-based chief investment officer at Jingxi Investment Management Co. “That’s causing small-caps to tumble. Their prices are too high.”

The China Securities Regulatory Commission didn’t immediately reply to an e-mailed request for comment. The ChiNext has jumped 56 percent this year, taking its reported price-to-earnings ratio to a record high of 87.2 times on Wednesday, as the government encourages innovation and massive entrepreneurship through direct financing from the stock market.

The 14-day relative strength measure for the Shanghai index, measuring how rapidly prices have advanced or dropped during a specified time period, was at 75.9 Thursday. Readings above 70 indicate a price may be poised to fall. Trading volumes on the measure were 42 percent above their 30-day average.

Liquidity Indicators

The Shanghai Composite climbed for 10 consecutive days through March 24, the longest winning streak since 1992, as daily turnover on mainland bourses surged to an unprecedented 1.4 trillion yuan ($225 billion). Mainland traders opened a record number of new accounts to buy yuan-denominated A shares in the week to March 20, while the value of equities purchased with borrowed money rose to an all-time high on Wednesday.

The signs of a Chinese equity bubble are visible just about everywhere Hao Hong looks.

The chief China strategist at Bocom International Holdings Co. points to soaring price-to-earnings ratios, the shrinking yield advantage that stocks offer over bonds and the fact that mainland-listed equities now trade at a 34 percent premium over nearly identical shares in Hong Kong.

So what’s Hong’s advice to investors?

Keep buying, of course.

“Our traditional market models may not be able to capture the full picture,” he said a few days after spelling out his stance in a March 20 report titled “Price-to-Whatever Ratio: A Bubble Scenario.”