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Political strife puts economic boost on hold(Bangkok Post (Thailand) (KRT) Via Thomson Dialog NewsEdge) Apr. 3--Political risk is unlikely to lessen in the short term, as considerable uncertainties remain about whether a full government can be formed or whether the anti-Thaksin movement will subside following yesterday's general elections. Analysts said the market could see some immediate sentiment-driven gains today, but that risks remained high in the uncertain environment. Pisit Serewiwattana, managing director at BT Securities, expected the overall investment environment to remain sluggish over the next several weeks. "The megaproject infrastructure programme has already been delayed. Any further problems in forming a new Parliament will mean further delays," he said. Investors had been expecting that the 1.8-trillion-baht, five-year megaproject programme would be a significant boost for local contractors and the overall market. But political paralysis over the past several months has delayed the bidding and planning process, making it unlikely that the programme will begin until 2007. Mr Pisit said foreign investors, who have been major net buyers in the first quarter, would likely slow investment activity for at least six months pending greater clarity of the political situation and to see what changes in economic policy might emerge from the new government. "If policy remains unchanged, we will see investment in the SET gradually pick up. We should see conditions in the market improve in the second half, if current conflict is resolved peacefully," he said. Sirinattha Techasiriwan, research head at Syrus Securities, agreed that the political situation would remain fluid over the next several months. The boycott by the Democrat Party and other opposition parties has raised questions on whether the Thai Rak Thai Party can effectively pass the threshhold needed to win each district outright, particularly in the southern provinces where the popularity of TRT head Thaksin Shinawatra remains low. Uncertainties on the status of the 100 party list of MPs has raised the prospect of legal challenges for the Election Commission and Constitutional Court. "If 500 seats can be named, then there won't be a problem. But if not, then the situation will drag on," Ms Sirinattha said. "If Mr Thaksin returns as prime minister, it's unknown whether the protests will continue. Mr Thaksin has said himself that if he fails to capture 50 percent of the vote, he will step down himself. We just have to see what happens." Wichai Poolworaluk, president of the Thai Investors' Association, said he was cautiously optimistic, noting that the SET last week recorded some slight gains. The SET index closed on Friday at 733.25 points, up 2.26, on moderate volume of 18.26 billion baht. The index rose 0.33 percent last week, but remains off 1.76 percent over the past month. "One factor that will weigh on the market is whether the election has been compromised by fraud, whether a Parliament can be formed and whether byelections will be required. Investors will just take a wait-and-see approach until the situation clears," Mr Wichai said. One securities executive said the conflicts had centred primarily on perceptions of Mr Thaksin himself, and doubted that the new elections would do much to eliminate the conflicts that have split Thai society over the past several months. Anti-Thaksin protesters, led by Sondhi Limthongkul and Maj Gen Chamlong Srimuang, claim that Mr Thaksin has lost any ethical standing to lead the country, with state policies over the past five years often slanted to favour vested interests. Mr Thaksin has ruled out any capitulation to the protesters, while state agencies have cleared the one-time telecom tycoon of any tax or securities violations related to the January sale of Shin Corp to Singapore's Temasek Holdings. One analyst said the standoff between Mr Thaksin and his detractors will only intensify in the days ahead. "We expect some gains for the market today, based on speculative buying in anticipation of a TRT election victory. But investors should look to take profits in after the post-election rally, as we think political tensions will only intensify after the poll rather than dissipate," he said. If TRT ends up with fewer seats, it would only further affect the legitimacy of the new government and potentially undermine policy operations, leading to broad declines in banks, telecom, securities and contractors' stocks to push the index under 700, the analyst said. "If TRT suffers heavy losses in Bangkok, the anti-Thaksin movement will only get stronger," he said. Even if TRT carried Bangkok, voting fraud allegations would also undermine public confidence and weigh on the market, he added. "For investors, the best scenario would be TRT winning handily and Mr Thaksin stepping down for a break. You can expect a strong rally in that situation, however unlikely it might be," said the analyst. |