UPDATE 1-Fiat shares rise on broker views, talk of China deal

Mon Jan 14, 2013 7:35am EST

(Adds broker comments on possible China deal)

MILAN Jan 14 (Reuters) - Shares in Italian car maker Fiat rose more than 6 percent on Monday, helped by positive broker notes and talk of an imminent announcement of a deal to produce Jeep vehicles in China.

Traders noted Fiat was removed from broker Equita's "least preferred list" and suggested that some hedge funds might have decided to reduce their short positions on the stock.

Earlier on Monday, UBS raised its target price on Fiat to 4 euros from 3.5 euros. The broker has a neutral rating.

Italian newspaper Corriere della Sera said on Sunday Fiat and its U.S. unit Chrysler were set to sign a new agreement with Guangzhou Automobile Group Co (CAG) to produce Jeep vehicles for the Chinese market.

Fiat and Chrysler boss Sergio Marchionne could announce the deal at the Detroit auto show, which kicks off on Monday, it said.

Banca Akros analysts said China would be a key market to help Fiat reach or exceed a medium term target of selling 800,000 Jeeps per year.

"The announcement would also demonstrate that the Fiat/GAC partnership is working well and that GAC is a reliable partner for future developments," they said.

A Fiat spokesman declined to comment on Monday.

By 1225 GMT, Fiat shares were up 4.5 percent at 4.31 euros, having traded as high as 4.398 euros. The European auto index was 1.2 percent higher. (Reporting by Maria Pia Quaglia and Danilo Masoni; Editing by Mark Potter)

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