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Thai Markets Reflect Peace Hopes After Thaksin Shock


Thailand's financial markets breathed a sigh of relief on Friday in the absence of immediate violence in the wake of the stunning banishment of ousted Prime Minister Thaksin Shinawatra and his party from politics.

The SET Composite Index was higher and dealers said foreigners, who have been propping up the lackluster market this year as many domestic investors waited for a political crisis to ease, and Thais were buying.

Neither the bond market nor the local currency market showed much reaction to the developments, to the surprise of some analysts, and the baht held steady near a 9-1/2-year high hit earlier this month.

Wednesday's court decision to ban the exiled Thaksin from politics for five years and disband his party for election fraud fuelled hopes that the general election the military-installed government has promised in December would be held on time.

The prospect of a return to elected politics after December and the poor turnout of only 2,000 people on Thursday night to protest against the verdicts fostered some optimism, DBS Vickers Securities analyst Arpaporn Sawaengpak said.

"The market hopes the general election would be held in December as scheduled," she said. "Investors view the verdict as helping end the political gridlock."

However, nobody was betting heavily on an end to a political crisis that started early last year.

It began with street demonstrations against Thaksin, which culminated in a bloodless September coup and continued in a tense lead-up to the Constitutional Tribunal's verdict on Wednesday.

It is not over yet, with Thaksin's Thai Rak Thai (Thais Love Thais) party furious and being disbanded and having 111 leaders banned from politics for five years while the tribunal absolved the opposition Democrat Party of all charges against it.

Thaksin is also likely to face charges of corruption, one of the reasons the military gave for the coup, and they could prove another flashpoint.

No Strong Rally

The old leaders of Thai Rak Thai, which will reappear under a new name once the generals allow political activities to resume, will be pulling the strings from behind the scenes, analysts say.

"I do not expect a strong rally given there's still a risk of street protests," Arpaporn said.

The Thai bourse has risen only 9.8% so far this year, mostly because foreigners have bought shares worth 66 billion baht (US$1.9 billion), while Malaysia's main index is up more than 23% and Singapore's is up 19%.

Most Thais, a generally risk-averse people, have been looking elsewhere to invest their money as economic growth slowed and consumer confidence dipped under the weight of political worries despite a steady fall in inflation.

Many have gone into the bond market, where yields were largely flat to lower in thin Friday trade because most investors thought the Constitutional Tribunal verdicts would not have any significant impact one way or the other, dealers said.

The bond market was more focused on interest rates after the Bank of Thailand cut them four times this year to 3.5% to stimulate the flagging economy and were waiting to see whether the general election would be on time, they said.

Thai markets were closed on Thursday for a public holiday.

The Thai baht, which has been rising steadily over the past 18 months, largely because exports have been thriving, was similarly unmoved by the tribunal verdicts, which one Bangkok-based trader described as "good news" for the markets.