SynopsisChinese stocks showed stability as investors shifted focus from technology to traditional sectors. Disappointing second-quarter economic growth data did not significantly impact market sentiment. Consumer and financial stocks saw gains while technology shares experienced profit-taking. Hong Kong equities outperformed mainland markets, supported by major technology companies. European investors maintain strong interest in Chinese equities, focusing on localization efforts.ETMarkets.comTechnology shares came under pressure as investors locked in gains ahead of what is expected to be Asia's largest initial public offering this year.Chinese stocks were largely steady on Wednesday as investors looked beyond weaker-than-expected second-quarter economic growth, rotating into traditional sectors such as consumer and financial stocks while taking profits in technology shares linked to the artificial intelligence boom. Hong Kong equities outperformed their mainland peers, as per a Reuters report.By the midday break, China's blue-chip CSI 300 Index was little changed, while the Shanghai Composite Index slipped 0.1%. In Hong Kong, the Hang Seng Index advanced 1.5%, supported by gains in major technology companies.Weak GDP Data Fails to Dent Market SentimentInvestor sentiment remained resilient despite data showing China's economy expanded 4.3% year-on-year in the second quarter, missing market expectations. According to Reuters, softer domestic demand and the economic impact of the Iran war-related oil shock offset strength in industrial production and exports.Rather than triggering broad-based selling, the disappointing data reinforced an ongoing shift in market leadership, with investors favouring defensive and value-oriented sectors over high-growth technology stocks.Traditional Sectors Lead GainsConsumer-related stocks outperformed after June retail sales rose 1%, boosting optimism over domestic consumption. China's consumer staples index climbed 3.6%.Property shares also rallied nearly 5%, even though the sector continues to struggle. Official data showed real estate investment declined 18% in the first half of the year, underscoring the industry's prolonged weakness.Financial stocks also attracted investor interest as part of the broader rotation into traditional sectors.Chip Stocks Slide on Profit BookingTechnology shares came under pressure as investors locked in gains ahead of what is expected to be Asia's largest initial public offering this year.China's tech-focused STAR50 Index dropped 3.7%. ChangXin Memory Technologies (CXMT) plans to raise about 57.9 billion yuan (around $8.55 billion), excluding any over-allotment option, through its Shanghai listing.The weakness reflected a cooling rally in AI-related semiconductor stocks that have been among the market's strongest performers in recent months.Hong Kong Tech Shares RecoverDespite weakness in mainland chip stocks, Hong Kong-listed technology giants gained 1.4%, helping lift the broader Hang Seng Index.The divergence between mainland AI-related shares and Hong Kong technology names highlighted varying investor positioning across markets.UBS Sees Continued Interest in Chinese EquitiesAccording to a note from UBS strategists cited by Reuters, European investors continue to show strong interest in Chinese equities, with artificial intelligence remaining the dominant investment theme despite recent volatility and profit-taking.The strategists said investors are increasingly focusing on companies that stand to benefit from China's efforts to localise its technology supply chain, expand domestic capital expenditure and strengthen strategic industries. They also noted that market participants continue to favour sector leaders with attractive valuations.Market OutlookWednesday's trading underscored a growing split within China's equity market. While concerns over slowing economic growth remain, investors are increasingly favouring sectors tied to domestic consumption and financial stability, even as enthusiasm for AI-related stocks cools after a strong rally. With major IPO activity and policy developments in focus, sector rotation is expected to remain a key driver of market performance in the coming weeks.Read More News on(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. 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