Bargain-hunters boost banks, help FTSE higher

* FTSE 100 up 1.8 pct

* Miners track metal prices higher after China data

* G4S boosted by solid H1 results, outlook

* ARM Holdings lifted by bid rumours

By Tricia Wright

LONDON, Aug 23 (Reuters) - Britain's top shares rose on Tuesday as bargain-hunters took advantage of recent falls, particularly in banks, while miners tracked metals prices higher after robust factory output data eased fears that China's economic growth was slowing.

Takeover rumours also helped lift investor sentiment. ARM Holdings was among the top blue-chip risers, up 5.2 percent, as traders revived talk about the chip designer's appeal as a bid target.

And midcap Charter International jumped 9.5 percent after the Daily Telegraph reported that a mystery bidder has made a 1.5 billion pound takeover proposal for the industrial tools maker, potentially trumping Melrose's approach.

Both companies declined to comment.

The FTSE 100 index was up 89.71 points, or 1.8 percent, at 5,185.01 by 0817 GMT, continuing its ascent after a rout sparked by global growth concerns sent the index down 5.2 percent last week.

Buyers came in for the banks, bolstered by upbeat broker comment after a drop of almost 20 percent on the FTSE 350 Banks Index over the course of August.

"We see value in the UK banks overall, although we are mindful of the multiple risks currently facing the sector, most notably related to sovereign debt, economic growth, funding conditions and UK regulation," Goldman Sachs said in a note.

The broker said it prefers HSBC , up 1.4 percent, and Lloyds Banking Group , 0.5 percent firmer, among the UK banks.

Nomura, meanwhile, said it remained bullish on European banks.

"Another bullish start as even the banking sector starts to look cheap... and with mining stocks enjoying the continuing increase in the price of metals we seem set for more rises," Mic Mills, head of electronic trading at ETX Capital, said.

Mining stocks were the top gainers as investors took some heart from HSBC's China flash purchasing managers' index.

The data, while showing China's factory sector was likely to slow slightly for a second consecutive month in August, indicated the world's number two economy was still growing robustly.

Chilean miner Antofagasta , up 3.4 percent, was among the best off after coming within analyst forecasts with a more than 54 percent rise in first-half earnings.

G4S gained 6.2 percent, the biggest FTSE 100 riser, as the security services firm's solid first-half results and outlook prompted Espirito Santo Investment Bank to repeat its "buy" rating on the stock.

Traders said there was a growing view in the market that Federal Reserve Chairman Ben Bernanke might hint at additional stimulus measures at a meeting of central bankers in Jackson Hole, Wyoming, on Friday.

"The recent weakness in equities to near a historic low is tempting buyers back into the market on low valuations," Atif Latif, director of Trading Equities & Derivatives at Guardian Stockbrokers, said.

"We are also hearing there may be some positive catalyst from Jackson Hole on Friday also adding to the positive sentiment."

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