Thailand is sliding closer to chaos as opposition protesters and Government forces and supporters clash on the street of the capital, Bangkok, leaving two dead and an around 100 injured in clashes yesterday.
The increasingly deadly clashes prompting a leading investment bank and a broker to recommend to investors they sell their Thai shares, and a renewed threat to the country’s already weak credit standing internationally.
Credit Suisse told investors the rebound in stockmarkets has opened an opportunity top take profits if they were worried by the unrest, and Standard & Poor’s said the Thai rating of Triple B plus was in danger of being cut.
A government decision to announce a state of emergency in Bangkok was ignored and seen as an “a declaration of war”, to quote one unnamed leader interviewed by Reuters.
That prompted protests and the Thai army cracked down on anti-government protesters yesterday, firing warning shots in a major junction of the capital at activists who responded by hurling petrol bombs at them, a Reuters reporter said.
An army spokesman said soldiers trying to clear a main road in Bangkok were shot at by protesters before dawn yesterday and had fired back.
Reports said troops had fired into the air first in response to tear gas and smoke bombs thrown at them by protesters but then fired real bullets.
At the Din Daeng intersection, Bangkok’s biggest, media report said troops repeatedly charged groups of protesters to clear a major road leading out of the city as Thailand began celebrating its three-day New Year’s holiday on Monday.
This and other situations continued throughout the day into last night. The government claimed to have regained control of the Thai capital’s streets.
But some 4,000 protesters remained around the prime minister’s office in central Bangkok, surrounded by security forces.
Prime Minister Abhisit Vejjajiva declared a state of emergency in Bangkok on Sunday after the red-shirted supporters of former prime minister Thaksin Shinawatra forced the cancellation of an Asian summit in the southern beach resort of Pattaya at the weekend.
That move humiliated the four month leadership of the country which is based on the ‘yellow-shirts’ who opposed the previous government and forced it from power by similar tactics late last year.
The renewed violence and political instability that enormous importance for Thailand and the rest of Asean.
That the Asean conference was called off twice within six months in Thailand means the other leaders from the group, plus those from Chin, Australia and Japan will start wondering about the viability of the group.
As well countries like Japan, South Korea, Australia and India have investments in Thailand. The long term viability of these and the country as a destination for foreign investment, will be open to question the longer the instability continues.
Thailand has been unstable since 2006 when Thaksin Shinawatra, the former elected Prime Minister was forced from power in a coup.
Investment bank, Credit Suisse has warned investors that they should “take profit” on Thai shares because of the potential for worsening instability.
Credit Suisse Group told clients in Asia yesterday that the rebound in global markets in the past month offered investors a chance to sell their Thai holdings, including property stocks.
“A return to the dark days of the second half of 2008 is not inevitable but the risk of prolonged political tensions is high,” CS wrote.
“We now suggest taking profit in key stocks and sectors we had previously liked,” Bloomberg reported the brokerage as saying.
Risks to property developers are also increasing and investors face the prospect of becoming “stuck” in these “fairly illiquid” stocks, CS said.
“Fundamentally, the stocks remain attractive as valuations are still cheap and demand is surprising in its resilience, but the downside risks are growing,” the firm wrote.
Thailand’s market is up 10% over the last month. The market will be closed until April 16 for the Thai New Year Festival holidays.
Standard & Poor’s said Thailand’s BBB+ credit rating may be lowered because of the unrest and the potential impact on an already slowing economy.
S&P says the Thai economy could slow by 2% this year, but the unrest had lifted the risk of further damage.
“There is a significant chance of a ratings downgrade,” Bloomberg quoted Kim Eng Tan, S&P’s Singapore-based director of sovereign & international public finance ratings as saying yesterday.
“We have a negative outlook on the government ratings because of the continuing divide in Thai politics and the lack of obvious peaceful means of resolving it.”
“The biggest risk is widespread violence,” Tan said. “Investors both foreign and local are more wary of planting investment in the country.”
S&P revised its rating outlook on Thailand to negative from stable last December as political protests aimed at ousting the previous government climaxed in the week-long shutdown of Bangkok’s international airport and the eventual ousting of the government in a suspect parliamentary vote.
The anti-government protesters reacted to Sunday’s declaration by attacking both the Ministry of Interior, from where the Prime Minister had made the announcement, and his car as he left the building.
The car was severely damaged but the prime minister managed to escape the area after guards fired shots in the air.
