The Business Times

Markets shrug off Thailand's coup

Analysts optimistic that military takeover could steer country back on the right track

Published Fri, May 23, 2014 · 10:00 PM
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INVESTORS greeted Thailand's latest military takeover with shrugs and a shake of the head yesterday.

That's what one coup every seven years will do for you.

Observers mostly expect the coup to bring near-term stability to Thailand, although concerns are more acute about the future of the country.

Thailand's main equity benchmark, the SET Index, touched a two-week low at yesterday's opening, but climbed steadily over the day to head out at 1,396.84, down 0.6 per cent or 8.37 points on the day.

The Thai baht lost ground as well, to 32.6070 baht per US dollar, about 0.1 per cent weaker on the day but still not the worst performance of the month.

Singapore's key Thailand exposed stocks were mostly untouched.

Drinks maker Thai Beverage Public Co gained 1.7 per cent, or one cent, to close at 60.5 cents. Readymade drinks supplier Super Group was flat at $2.86, while United Overseas Bank was 0.09 per cent, or two cents, lower at $22.35.

"So far, the recent developments in Thailand have minimal impact on the Singapore market or stocks," said OCBC head of research Carmen Lee.

UOB Kay Hian research head Andrew Chow thought there could be marginal benefits for Singapore.

"Indirectly, it might be that people pull money out of Thailand, and they want to park some money in Singapore, but that would mostly go to the more defensive blue chips," he said.

The coup, Thailand's 12th since 1932, has ushered in a sense of annoyance but also relief that the political impasse that has kept the country at a standstill for the past six months could finally end.

"One of my colleagues is there," Mr Chow said. "It's more a feeling of inconvenience rather than fear or violence."

In a note, ANZ wrote: "The imposition of military coup is certainly not the type of development typically associated with an improving economic outlook. However, in the case of Thailand, it could well prove to be the circuit breaker that allows a return to political normalisation and ultimately allows fiscal policy to become operational again."

But the very factors that have led some to welcome military intervention also make it critical that the army makes the right moves in the months ahead.

Amid the past political fighting, the Thai economy contracted 0.6 per cent year-on-year in the first three months of 2014, with investment and tourism showing significant declines, Moody's Analytics highlighted in a note.

"Given recent events, we now think the economy will record a second negative quarter in the three months to June, putting it in recession," Moody's wrote.

RHB reckoned that private sector confidence will be muted while the military is in power, based on weak private spending during the 2006 coup.

Nevertheless, some analysts conveyed optimism that this coup could actually steer Thailand back on the right track.

"Unlike previous military crackdowns in 2006 and 2010, the current peaceful coup may well create a stable social environment - a key ingredient in supporting market sentiment and ensuring a successful democratic election in Q3 2014," OCBC economist Barnabas Gan wrote.

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