The stake - amassed in the course of an unprecedented $100bn support operation to fend off speculative attacks against the Hong Kong dollar over recent weeks - will raise fears of "backdoor nationalisation" by the Chinese. It gives the Hong Kong government, now an offshoot of the Chinese People's Republic, considerable leverage over the bank if it should chose to use it.
More than $58bn was spent on Friday alone as the Hong Kong authorities threw down the gauntlet to George Soros and other well-known hedge fund operators who are betting that the dollar peg, a cornerstone of Hong Kong's economic policy since 1983 is about to go.
In a statement released last night after the close of London trading, the Hong Kong Monetary Authority said it had 13.23 per cent of HSBC's Hong Kong shares. When the London traded shares are included, that comes down to 8.9 per cent.
HSBC, which moved its primary listing to London when it acquired the Midland, partly to forestall the threat of meddling by the Chinese authorities once the former British colony reverted to Chinese control, said last night that it saw no reason to comment on the shareholding.
The Hong Kong authorities have refused to give any indication about what they plan to do with their shareholding. However, there are bound to be fears about their intentions.
The government is believed to have picked up similarly sized stakes in other big Hong Kong corporations, including Swire Pacific and Cheung Kong, the property company and vehicle of one of Hong Kong's largest entrepreneurs Li-Ka Shing, as well as Hong Kong Telecom, whose biggest shareholder is Cable & Wireless.
The Hong Kong government has now called a halt to its buying. Financial Secretary Donald Tsang said the next step would be to tighten regulations on share and futures dealing.
"We've accomplished what we set out to do," he said.