Malaysia's Khazanah Nasional Bhd is seeking to buy General Electric's US$1.8 billion stake in Bank of Ayudhya (BAY), sources familiar with the matter said, pitting it against Japanese banking giant Mitsubishi UFJ Financial Group (MUFG).

Khazanah's bid for GE's 25.3 per cent stake came as a surprise, the sources said, declining to be identified as the information was not public.

The proposed acquisition would be the largest purchase of an overseas banking asset by Khazanah as it plays catch-up with Singapore state investor Temasek Holdings Pvt Ltd. The Malaysian sovereign wealth fund currently manages a portfolio that is just a quarter of the US$158 billion of assets held by its neighbouring rival.

Khazanah had in the past shied away from taking large banking stakes overseas, focusing on healthcare assets in Singapore and Turkey as well as real estate deals. The bid for GE's stake would mark a shift in Khazanah's strategy.

A successful acquisition of the stake in BAY would bring Khazanah closer to Temasek in terms of investment approaches.

The Singapore state investor already owns sizable shares in Standard Chartered Plc, China Construction Bank Corp and Indonesia's Bank Danamon.

The Malaysian state investor is acquiring assets in neighbouring emerging markets as the outlook for Southeast Asian economies remains resilient in the face of global economic uncertainty.

Some analysts say Thailand is witnessing its best investment cycle in 20 years.

BAY, which has a market value of nearly US$7 billion, is the leader in the Thai retail and consumer lending sector. It is also Thailand's fifth-largest lender.

General Electric Co is selling its remaining 25.3 per cent stake in BAY as it divests non-core assets across the world.

Officials from Khazanah and GE declined to comment.-- Reuters