UPDATE 1-Malaysia's P&O receives nod to talk to Prudential

* No discussions on price yet

* Pacific & Orient shares jump 17 percent (Recasts with central bank approval, adds background)

KUALA LUMPUR, Aug 12 (Reuters) - Malaysia's central bank has given the nod for Prudential Holdings Ltd to begin talks to buy a stake in insurer Pacific & Orient PACO.KL, a source with direct knowledge of the deal said on Thursday.

Prudential Holdings, a subsidiary of Prudential PLC PRU.L, is the latest foreign insurer keen to enter Malaysia's growing insurance market.

“Pacific & Orient received the approval by fax (Wednesday) yesterday morning, but there have been no discussions about a price yet,” the source said, asking not to be identified as the approval had not been made public.

Pacific & Orient shares were up 17 percent to 1.24 ringgit by 0847 GMT.

Pacific & Orient declined to comment while Prudential’s Malaysian officials were not immediately available.

Pacific & Orient had said this month it asked the central bank for approval to begin preliminary talks for the potential divestment of an equity interest in Pacific & Orient Insurance to Prudential [ID:nSGE6710H3]

The news follows Malaysia's Hong Leong Financial Group HLCB.KL announcement n June it would merge its non-life insurance business with Japan's Mitsui Sumitomo Insurance Co and sell a stake in its life business in deals worth about $480 million. [ID:nSGE65H02R]

Analysts have said Prudential may be changing its approach to penetrating the Asian market after its failed bid for AIG's AIG.N Asian unit.

Prudential now holds a composite license in Malaysia that covers both the life and general insurance businesses. (Reporting by Fong Min Hun; Editing by Valerie Lee)