Thailand's markets swooned as the health of the country's beloved king took a turn for the worse, and the importance of the monarchy means more turmoil might be in store.
"The king is an important factor in the credibility of the coup leaders and the stability of Thailand through the transition," said Tony Nash, global vice president at Delta Economics. "Markets know that if the king's health falters, then questions will be raised about coup leaders, the prime minister and his government."
The SET dropped 1.7 percent on Monday after news emerged over the weekend that the king had been admitted to the hospital with a high fever. After palace officials said his condition was improving following an operation to remove his gallbladder, shares wavered between positive and negative territory on Tuesday.
King Bhumibol Adulyadej has headed Thailand's constitutional monarchy for over 60 years, but the 86-year-old's health is failing. While he is revered across the country, his son, the crown prince, is less popular. The Crown Prince, Maha Vajiralongkorn, has a reputation as a big-spending playboy.
In May, after more than seven months of political protests, Thailand's army chief, General Prayuth Chan-ocha, declared the military had seized power in a coup and later declared himself prime minister.
"If markets were confident in the current government, you wouldn't see this volatility around the king's trips in and out of the hospital," Nash said. "What would help markets would be a more public discussion about succession planning."
'Not a factor'
To be sure, some aren't as convinced that the king's health is a major market driver.
"We view the situation as temporary," Maria Lapiz, an analyst at Maybank-KimEng, said in a note Tuesday. She believes the move was primarily on a slew of bad economic news since the end of September as well as disappointment that foreign investors haven't returned the market.
So far this year, foreign investors have pulled around a net 3.87 billion baht ($120 million) from the Thai stock market, according to data from the stock exchange. In 2013, foreign investors pulled around 194 billion baht, or around $6 billion, from Thai shares, reversing the inflows from the previous four years.
"Whilst the negative economic data prints are expected to improve only marginally going forward, that is no news given the 2014 gross domestic product forecast is 1-1.5 percent," she said.
She expects the government's 364.5 billion baht stimulus package will help to kick start a recovery toward the end of the year. In addition, "domestic liquidity has limited investment options, thus will continue to support the market," she said.
Some market watchers agree.
"Obviously, everyone is concerned for his majesty's health," said Adithep Vanabriksha, chief investment officer at Aberdeen Asset Management in Thailand, but he added "he has no executive powers."
Instead, Adithep cited the market's surge higher this year, up around 20 percent before the correction and around 18 percent afterward.
"I don't think there's much of a surprise if there's some profit-taking," Adithep said.
By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1