The intervention - the second time the government has taken such a move in nine years - lifted its stake in HKEx to 5.88 percent, making the government the single largest shareholder.

Based on the stock's Friday closing price of HK$158, the stake is worth HK$9.9 billion.

Senior government sources told The Standard it was a significant step by the government to exert greater control over HKEx, which operates Asia's third-largest bourse, to ease Beijing's worries about the dangers of foreign institutions using Hong Kong's market to subvert the mainland financial system.

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The move is thought to have the blessing of the central government.

Since the government invested a whopping HK$118 billion to snap up stocks during the Asian financial crisis in 1998 to fend off speculators, Chief Executive Donald Tsang Yam-kuen, who was financial secretary at the time, has repeatedly pledged not to step into the market again.

In anticipation of possible criticisms of the intervention, the administration has taken the bold step in the name of defending national financial security before starting talks aimed at cementing ties with the SAR's sister stock exchanges in Shanghai and Shenzhen.

With a government-led bourse, it would be easier to reach a consensus on the issue of equity and capital share swaps in future negotiations with the mainland.