Thailand's Coup May Benefit Markets, Economy

[Jai Dee]

Thailand's coup may benefit markets, economy

HONG KONG (MarketWatch) -- The bloodless coup that took place in Thailand overnight could be a positive development for the country's economy and stock market if democracy is restored quickly, according to analysts and investors.

Gen. Sondhi Boonyaratkalin, the Thai Army chief, said he would serve as the country's acting prime minister the morning after his troops seized control of the government and revoked the constitution, establishing a provisional government in the name of the country's constitutional monarch.

Sondhi said the military would not hold onto power longer than necessary, and that it was committed to a rapid return to democracy.

The Thai currency, the baht, appeared to have stabilized at around 37.8 to the dollar after hitting a nearly two-month low of 37.9 overnight. The baht remained strong compared to its level earlier in the year, when it traded at around 41 to the dollar.

Fitch Ratings placed Thailand's sovereign rating on watch Wednesday morning with a view to a possible downgrade. However, Fitch added that the coup could be economically beneficial if the crisis was resolved quickly. Political turmoil has taken a toll on Thailand's economy this year, resulting in downward revisions of GDP forecasts, and many investors say they would welcome increased stability.

Lance Depew, who oversees the $250 million Thai-Focused Equity Fund for Quest Management in Bangkok, said that the local stock market may benefit if the coup leads to the formation of a stable constitutional government.

"I'm cautiously optimistic," said Depew. "I think you're going to see a knee-jerk reaction, but as long as the elections are brought forward in a timely manner, you'll see the market move higher than before the coup in a short period of time."

Depew said that the coup will likely affect Thai stocks and the baht negatively in the short-term, but will not spark a regional financial crisis.

"This is not macroeconomic in nature. Thailand still running very healthy external numbers," he said. "I don't think the economy will be shaken and I don't think it will affect other markets in the region."

Standard & Poor's warned that the coup could further damage the country's economic outlook unless democracy was restored.

"Failure to return to civilian rule in accordance with the Thai Constitution in the near term would not only extend the existing state of policy paralysis, but also severely affect the country's investment climate," wrote Standard & Poor's credit analyst Kim Eng Tan in a note Wednesday morning.

A long-brewing crisis

Thailand has a rich history of military coups, but Tuesday's was the first since 1991, when Gen. Suchinda Kraprayoon overthrew a civilian government.

The coup occurred late Tuesday night, with army tanks entering the center of Bangkok and surrounding key government buildings in the capital city.

Sondhi has met with the king to inform him that the military has seized power, according to reports. The support of Thailand's King Bhumibol Adulyadej is crucial for any national government, and is seen as an assurance of stability.

Banks, schools government offices and the country's stock exchange were all closed Wednesday on the military's orders.

Bangkok was calm following the coup, according to witnesses, with soldiers reportedly stationed throughout the city, including in front of major banks.

The country's embattled prime minister, Thaksin Shinawatra, remained in New York, where he had traveled to address the United Nations General Assembly. He has not yet ceded power and it was unclear when he would return to Thailand, according to reports. His family had reportedly left the country.

Thaksin had been under pressure to step down for much of this year, and coup rumors had been increasingly rife in recent months as a political standoff between the prime minister and his opponents intensified.

TV service in Bangkok had resumed Wednesday morning after being suspended since the coup, according to witnesses.

Foreign manufacturers' responses to the coup varied, with some keeping plants open Wednesday and others suspending operations.

Source: DowJones MarketWatch - 20 September 2006

[ace]

I think so too - just put some "gambling" money into Thailand off-shore UT. It's down 5% from yesterday, I hope to see that 5% come back and more.

[britmaveric]

I think so too - just put some "gambling" money into Thailand off-shore UT. It's down 5% from yesterday, I hope to see that 5% come back and more.

Expect a big drop tomorrow when the markets reopen.