Sept. 27 (Bloomberg) -- Hong Kong Exchanges & Clearing Ltd., the world's biggest bourse operator by value, rose after the London-based Times newspaper reported China's government may have bought a stake.

The stock has risen 49 percent since the Hong Kong government raised its holdings to 5.88 percent on Sept. 7. Ownership by the Chinese government may make it easier for the Hong Kong stock exchange to merge or forge partnerships with rivals on the mainland, investor Lei Wang said.

``Strategic integration of the Hong Kong exchange with those in the mainland would make sense over time,'' Wang, co-manager of more than $14 billion at Thornburg International Value Fund in Santa Fe, New Mexico, said by e-mail today. ``Stake holdings by both governments might help facilitate that.''

Hong Kong Exchanges rose 1.5 percent to HK$236 when trading ended at 4 p.m. local time. It had risen as much as 5.8 percent to HK$246 in Hong Kong earlier, close to the record of HK$248.40 on Sept. 24.

China's government may have invested some of its $200 billion sovereign wealth fund to buy a stake in the Hong Kong exchange, the Times reported yesterday, citing people close to the bourse that it didn't identify. The Hong Kong market was closed yesterday for a holiday.

New China Fund

The government may have bought its holding through the China Investment Corp., which is expected to be introduced formally later this week, as well as the national social security fund, the paper reported.

The China Investment Corp. doesn't have a contact number listed in the phone directory, hasn't made its Web site public, and couldn't be reached for a comment. The country's 460 billion yuan ($61 billion) National Council for Social Security Fund, which is allowed to buy Hong Kong-traded stocks, isn't aware of any investment in the city's bourse operator, spokeswoman Zhao Hongtao said.

Lorraine Chan, a spokeswoman for Hong Kong Exchanges, said the company doesn't comment on market speculation. The operator also doesn't know if the Chinese government already owns a stake as shareholders aren't required to disclose their interests unless they exceed 5 percent.

Shares Surge

Hong Kong Exchanges's stock has more than doubled this year, making it the most expensive among key rivals, according to data compiled by Bloomberg.

The bourse is trading at 57 times this year's estimated earnings, compared with CME Group Inc., the world's largest futures exchange, which trades at 40 times. Deutsche Boerse AG, Europe's biggest stock exchange by market value and the world's third-largest, is trading at 24 times its earnings this year.

The outflow of funds from China will probably lift trading volumes in Hong Kong and make the stock exchange an attractive investment for a Chinese sovereign fund seeking long-term returns, said Wang, who also owns shares of Hong Kong Exchanges.

``Over time, I expect Hong Kong Exchanges's trading volume and products to be offered to continue to increase,'' he said, adding that ``it could fit into the stock selection criteria of China's sovereign funds.''

Stock exchanges are earning more fees as trading volumes increase. Hong Kong shares worth HK$95 billion ($12 billion) were traded each day on average in the quarter ended Sept. 30, more than three times the daily average a year earlier.

Hong Kong Exchanges is also benefiting from a plan by China to allow mainland investors to buy stocks traded in Hong Kong directly. The Hong Kong government's higher stake followed a decision last year to form closer ties with regional financial organizations such as stock exchanges in China, Finance Secretary John Tsang said on Sept. 10.

The stock of Hong Kong Exchanges has more than doubled this year, compared with a 35 percent gain in the local benchmark Hang Seng Index.

To contact the reporter on this story: Chia-Peck Wong in Hong Kong at cpwong@bloomberg.net

Last Updated: September 27, 2007 04:29 EDT