KUALA LUMPUR/SHANGHAI, June 23 (Reuters) - Baosteel , China's second-largest steel producer, is in talks to buy a stake in Malaysian Lion Group's Amsteel Mills for about $1 billion, Bloomberg News cited two unnamed sources as saying.

Another report by The Edge newspaper cited similar news but did not provide specifics about the investment.

Officials with Lion could not be immediately reached for comment. Meng Haibiao, a media relations official at Baosteel, declined to comment.

"We ... think such a transaction may eventually involve selling at least 51 percent or up to 75 percent stake in Amsteel together with a call option for the buyer to acquire the remaining shares at a future date," Malaysian investment bank OSK said in a note to clients.

That was considering "that overseas investors may need to go through a gestation period to familiarise themselves with Malaysia's steel industry especially since it's a highly regulated and strategic industry in the eyes of the government," OSK said.

China has been dealing with an overcapacity problem in its steel industry, with the government encouraging consolidation in the industry as one way to address that issue.

Shifting some production capacity overseas could be another way of addressing the domestic supply glut, while helping to raise Chinese steel makers' global footprint.

So far there has been no rush among Chinese steel makers to make overseas acquisitions similar to the relatively high number of deals in the natural resources sector.

However, a few Chinese steel companies have started to show more global ambitions. Last year, Angang Steel Co Ltd said its state-owned parent had put its plan to invest in a U.S. steel plant on hold after facing opposition from U.S. lawmakers.

Anshan Iron & Steel Group had planned to take a $175 million stake in a rebar plant in Mississippi. (Reporting by Min Hun Fong and Niki Koswanage in Kuala Lumpur and Ruby Lian in Shanghai; Writing by Jason Subler; Editing by Jacqueline Wong)