The government has become the largest shareholder of Hong Kong Exchanges and Clearing after it revealed last Friday that it now holds a 5.88 per cent stake in the exchange.
The news has both positive and negative implications, according to brokers and legislators.
The government, as a major shareholder, is likely to give more support to the exchange and is in a better position to seek closer ties between the local and mainland exchanges, as well as fend off possible hostile takeovers.
However, its stake may also damage the free market spirit in Hong Kong, critics warn.
The latest development arose after the government last Friday spent HK$2.4 billion though the Exchange Fund - a reserve fund used mainly to defend the local currency - to increase its HKEx stake to 5.88 per cent, up from about 4.5 per cent and above the disclosure threshold.
Financial Secretary John Tsang Chun-wah has said the stake in the exchange is neither 'government intervention' nor a 'pure investment' but that it paved the way to establish closer links with the mainland bourses.
