UPDATE 1-Taiwan's Taishin in talks with China banks

* Taishin in talks with more than five Chinese banks

* Talks involve taking a stake, setting up venture in China

* Says highly likely to scrap fund raising after unit sale (Adds quotes, details)

By Faith Hung

TAIPEI, May 15 (Reuters) - Taishin (2887.TW), Taiwan's No.3 financial holding firm, is in talks with more than five Chinese banks on strategic alliances, a senior company executive said on Friday, as trade ties between China and Taiwan grow closer.

Taishin, whose investors include private equity firm Newbridge Capital [NB.UL] and billionaire investor George Soros, and local rivals hope to tap the huge Chinese market after Beijing and Taipei pledged to open their financial markets to each other.

Both sides recently signed a financial deal, paving the way for them to sign a memorandum of understanding (MOU) on financial supervision in the near future, sparking a 66 percent rally in financial stocks .TFNI since a recent low on March 2. [ID:nTP17043]

"Our options include allowing Chinese banks to take a stake in us, or forming a joint venture in China with them. We do not rule out either one," Chief Operating Officer Greg Gibb told reporters after an investor conference.

"We have developed quite good relations with these Chinese banks," he said, declining to elaborate.

Most forms of investment in China are now closed to Taiwan's financial institutions such as Taishin, but cross-strait ties have eased substantially under President Ma Ying-jeou's administration.

Chinatrust Financial (2891.TW), the island's top credit card issuer, said last week it was open to China banks investing in the firm and planned to set up a subsidiary on the mainland. [ID:nTP291673]

In related developments, Taishin, which was hit with massive losses last year amid the global economic crisis, on Friday said it will sell its broking arm to KGI Securities (6008.TWO) for T$29 billion ($881 million). [ID:nTP17043]

The deal would strengthen its financial structure, saving Taishin from the need to raise capital via a rights issue plan that would sell 700 million shares at T$5 each.

"We see a good chance that we'll cancel the rights issue," Gibb said.

Taishin shares closed up 5.5 percent on Friday, beating the main index's 2 percent gain. ($1=T$33.0) (Editing by Ian Geoghegan)