(Updates prices to midday, adds quotes)

By Jiaxing Li

HONG KONG, Sept 5 (Reuters) - China's stocks steadied on

Friday after steep losses in the previous session, but remained

on course for their biggest weekly fall in five months as a

stellar rally started to lose some steam.

The Shanghai Composite Index reversed losses at the

opening hour, and climbed 0.4% to 3,778.95 by the midday break.

Still the benchmark has declined 2.1% this week, on track for

the sharpest weekly drop since early April.

China's blue-chip CSI300 Index rebounded 0.9%, and

was also down 2.1% for the week in its biggest decline in five

months.

Tech shares, which took the hardest beating in the

correction on Thursday, led the recovery on Friday. The AI

sector was up 2.8% and the semiconductor sector

climbed 1.6%. Chip designer Cambricon

bounced 5.6% after sinking some 20% earlier in the week.

Selling pressure eased on Friday as a wave of profit-taking

after China's largest-ever military parade subsided. Markets

have also largely shaken off the jitters triggered by a

Bloomberg News report that Beijing is considering measures to

curb excessive stock speculation.

China's central bank said on Thursday it would inject 1

trillion yuan ($139.80 billion) into the banking system on

Friday via outright reverse repo operations to keep liquidity

"reasonably ample", interpreted by some as a gesture to calm

investors.

"We have not seen extreme bull market euphoria," said Wang

Zhuo, partner of Shanghai Zhuozhu Investment. "After all, armies

of retail investors have not yet rushed into the market, and

there's still room for fresh inflows."

Still, the decline this week snapped a two-month surge that

had pushed Shanghai's benchmark to 10-year highs, powered by

record sums of leveraged bets chasing the rally. Analysts at

China Securities said trading could remain volatile in short

term as the market enters a consolidation period.

"Taking some of the air out of the frothy part of the market

is setting up for a more sustainable path down the line," said

Jerry Wu, a portfolio manager at Polar Capital, based in London.

"It will be a healthy correction and I don't think it

changes the direction of travel, which we do believe is a sort

of innovation-driven rally."

In Hong Kong, the benchmark Hang Seng was up 0.6% on

Friday, heading for a weekly gain of 0.1%, while the tech sector

rebounded 0.8%.

($1 = 7.1529 Chinese yuan renminbi)