UPDATE 1-Taiwan's Fubon to join Xiamen Bank's fund-raising

* Fubon bets on China market, Xiamen Bank

* Stock jumps 1.7 percent, largely in line with main board (Recasts with details)

TAIPEI Aug 13 (Reuters) - Fubon Financial Holding (2881.TW), parent of Taiwan's No. 2 insurer, will participate in a fund-raising plan by China's Xiamen Commercial Bank by the end of the year, a top Fubon executive said on Thursday.

"We have very high hopes for Xiamen Bank," Fubon President Victor Kung told reporters. "We hope to expand market share and (Xiamen Bank) can open more branches."

Fubon Bank (Hong Kong) 0636.HK, part of Fubon Financial, holds a 19.99 percent stake in Xiamen Commercial Bank. Chinese regulations prohibit a single foreign institution from holding more than 20 percent of a Chinese bank.

Fubon's ownership in Xiamen would not change after the planned fund-raising, Kung said. He did not say how much money Xiamen Bank needed and did not clarify if the Chinese bank would raise the funds by issuing new shares or bonds.

However, Kung said Fubon Financial plans to buy the stake Fubon Bank owns in Xiamen Bank at an appropriate time, but he did not give a timetable.

On Thursday, Fubon shares ended up 1.74 percent, largely in line with the main TAIEX's .TWII gain.

Taiwan's ties with China, which has claimed the self-ruled island as its territory since the end of the Chinese civil war in 1949, have warmed considerably since the election last year of President Ma Ying-jeou, who promised friendlier relations.

Taiwan, home to Asia's fourth-largest banking system, has signed a broad financial services agreement with China that included an agreement to set up a regulatory framework for financial services firms on both sides to invest and do business in each others' markets. ($1=T$32.9) (Reporting by Rachel Lee, writing by Baker Li; Editing by Jacqueline Wong)