By Liz Lee

KUALA LUMPUR (Reuters) - Alibaba Group Holding Ltd said on Wednesday it would set up a logistics hub in Malaysia, the latest in a string of Chinese investments including in infrastructure and real estate projects, underscoring the close ties between the two countries.

The hub will be part of a digital free trade zone that was launched by Malaysian Prime Minister Najib Razak and Alibaba's founder and executive chairman Jack Ma in Kuala Lumpur on Wednesday.

The hub, expected to be launched end-2019, "will function as a centralized customs clearance, warehousing and fulfilment facility for Malaysia and the region, to deliver faster clearance for imports and exports," Alibaba said in a statement.

Alibaba did not disclose the size of its investment in the hub.

Alibaba said the logistics facility was part of an "e-hub" it was setting up at the free trade zone, part of Ma's Electronic World Trade Platform (eWTP) initiative that aims to remove barriers to trade for smaller firms and emerging nations.

The "e-hub" in Malaysia will be the first such facility outside China, and will also include collaboration between Alibaba affiliates and other Malaysian businesses.

Ant Financial - the financial services affiliate of Alibaba that includes Alipay - signed a memorandum of understanding with Malaysia's top banks CIMB Group Holdings Bhd and Malayan Banking Bhd to explore collaboration opportunities in e-payment and financing services.

The banks will allow Chinese tourists to use Alipay e-wallet services in Malaysia.

Ties between Malaysia and Beijing have blossomed in recent months. Najib returned from November's Beijing visit with 14 agreements amounting to $34.4 billion, which included an agreement to buy four Chinese naval vessels and collaboration to build rail projects in Malaysia.

Beijing also came to Najib's rescue in 2015 with a $2.3 billion deal to buy assets of troubled state fund 1MDB, helping ease concerns over its mounting debt.

The free trade zone will also include a digital hub to be developed by Kuala Lumpur-based internet firm Catcha Group, owner of iflix - Southeast Asia's equivalent of Netflix.

Investment by Catcha and partners in the digital hub is estimated at $200-$300 million, CEO Patrick Grove told Reuters.

(Reporting by Liz Lee; Writing by A. Ananthalakshmi; Editing by Biju Dwarakanath)