Election Spurs Thai Bourse Despite Concerns Over Thai Rak Thai Policy
According to an AFP report, despite a boost in investor confidence as political uncertainty receded in the wake of the election, Thailand still faces the specter of crushing public debt, a weak baht, high oil prices and a downturn in the U.S. economy that would have serious repercussions here.
Nevertheless, the Thai bourse bounded ahead on news that Thaksin and his Thai Rak Thai party had trounced the ruling Democrats and may even hold a simple majority in parliament for the first time in Thai history.
The Stock Exchange of Thailand (SET) composite index opened up 7.81 points or 2.7 percent at 294.57, but analysts cautioned that the gains could be fleeting.
"The market opened strongly, with the banks and communications sectors the strongest. The obvious reasons are Thaksin's connections in the telecommunications sector," said Gene Garfield, head of research at capital Nomura Securities.
"The banks are doing well on expectations that a national AMC (Asset Management Company) will be set up to handle their non-performing loans."
Thaksin has indicated a Thai Rak Thai government will take over the responsibility of sifting through the mountain of bad loans which are strangling attempts to revive Thai business after the 1997 crisis.
Analysts broadly disapprove of the policy, and other populist initiatives raised by Thai Rak Thai including a proposal to waive debts in the agricultural sector, which they say will set a bad precedent.
"I think investors will be sorely disappointed they were so enthusiastic at this time," said Garfield.
"Thailand's economy has been stagnant over the last two quarters and it will probably get worse."
"It's something that no political party in Thailand can change, no matter how strong the mandate."
Analysts point to larger economic forces such as the weakening us technology market, which could undercut Thailand's manufacturing and export base.
Exports of manufactured consumer electronics represent one of the few bright spots in the Thai economy, which showed signs of slowing alarmingly at the end of 2000.
Though the banking sector surged Monday morning, analysts are concerned about mounting public debt and Thaksin's proposed policy to shift bank debt to the government.
"You'll see these gains reversed as the hole gets bigger in the government," Garfield said.
SG Securities banking analyst Andrew Stotz said after the Saturday poll that Thai Rak Thai's strong showing would ease the worries of some local investors.
But he added there were concerns abroad about graft charges that may see Thaksin kicked out of politics within months.
"Although locally people say it's time for a change, foreign investors are more worried about the constitutional court decision," he said as the anti-corruption commission prepared to refer the case to the court.
With the race for the premiership all but concluded, attention will now turn to who will fill the post of finance minister, a job that has become even more critical to Thailand's future since the 1997 economic crisis.
Current Finance Minister Tarrin Nimmanhaeminda has been criticized for the slow pace of recovery and his failure to act decisively to clear the mountain of bad debts owed to banks.
Thaksin has said he will look beyond his own party in search of a new finance minister. His advisor Surakiarti Sathienthai Sunday named three possible non-party candidates for the job.
The first is former Bank of Thailand governor Chatu Mongol Sonakul, who is well acquainted with the inner workings of the Thai banking system.
"He's seen it all from the inside and I can't imagine he has any interest in cutting deals with the banks. There's no way Thaksin will be able to control this guy," said Stotz.
Another possible successor is Bangkok Bank Executive Director Kosit Panpiemras, who has shown a determination to keep flagging Thai banks in Thai hands, in line with Thai Rak Thai policy.
Exim Bank President Pridiyathorn Devakula is reportedly another candidate under consideration for the job.