UCBH: Pump Up the Volume

SAN FRANCISCO (TheStreet) -- UCBH Holdings (UCBH Quote) shares surged nearly 22% Wednesday on above-average volume after a report that a Chinese bank wants to increase its stake in the company.

Bloomberg reported Wednesday that Minsheng Bank, China's first privately owned bank, plans to seek U.S. regulatory approval to increase its stake in UCBH Holdings to at least 50% from 9.6%, citing two people briefed on the matter.

Minsheng already has an option to raise its stake to about 20%, the report said.

UCBH shares were rising 25 cents, or 21.6%, to $1.41. Earlier, the stock touched an intraday high of $1.47. More than 15.2 million shares changed hands in the first hour of trading Wednesday, compared to the stock's 50-day average daily volume of five million, according to the Nasdaq.

An investor post on an Internet message board argued that if Minsheng were to get 50% of UCBH's common stock, it would imply an influx of approximately $40 million. This, the commenter argued, would be "only a drop in the bucket" to bolster UCBH's capital levels.

In September, UCBH entered into an agreement with the Federal Deposit Insurance Corp. and the California Department of Financial Institutions for a cease and desist order in which it consented to "enhance the strength and stability of the bank and its operations."

The investor post went on to say that no outcome is good for current shareholders, as they face either significant dilution with a need for more capital or an FDIC takeover.

Other message board posters argued that the stock has strong positive technicals with heavy volume, and that it would be a mistake to sell UCBH now with more upside still to go.

Read more about today's high-volume stocks in earlier "Pump Up the Volume" posts.

-- Written by Robert Holmes in New York.