Industrial and Commercial Bank of China (ICBC) is in talks to buy a stake in Taiwan's Cathay Financial, sources said yesterday, in a deal that could be worth more than $3 billion.

The talks come amid an easing of cross-Straits relations between the mainland and Taiwan, in hopes of boosting both economic and political ties.

One source said that ICBC was interested in buying a roughly 20-percent stake in Cathay Financial, Taiwan's top listed financial holding group, which has a market capitalization of around $17 billion.

"The two firms have met five to six times in the past two months. The talks are getting very serious," said the source.

Another source said that the talks were in their early stages. ICBC, the world's largest bank by market capitalization, and Cathay Financial declined to comment.

The sources did not want to be identified because they were not authorized to speak publicly about the deal. Mainland-Taiwan trade relations have thawed since Taiwan leader Ma Ying-jeou took office last year, with bilateral deals promoting tourism and shipping links already concluded.

ICBC and Cathay hope to make an announcement soon after Taiwan and the mainland sign a free trade pact, which Taiwan aims to sign early next year, the source said.

ICBC shares closed up 0.6 percent in Hong Kong yesterday, while Cathay shares ended down 0.17 percent in Taipei.

Cathay Financial Group was established in Taiwan on Dec 31, 2001, with a registered capital of NT$120 billion. The company has become a full-functioning financial conglomerate composed of insurance, securities, banking and other financial institutions.

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