Tuesday, July 8, 2008

Thai politics drive down share market


Thai shares fell 1.68% yesterday as investors retreated to the sidelines over political uncertainties as a number of key court cases will be decided over the next several weeks.

The Stock Exchange of Thailand index closed at 730.56 points, down 12.47, in thin trade worth 9.6 billion baht, about half the daily average for the year. Energy stocks lost 2.82%, property 1.91% and banks 1.04%.

The Supreme Court today will announce whether Yongyuth Tiyapairat, a senior People Power Party official, committed election fraud during last December's campaign. A guilty verdict could set the stage for the PPP to be dissolved and its senior executives banned from political activity, a penalty similar to that given to the former Thai Rak Thai party last year.

The Constitutional Court is also expected to rule today whether Foreign Minister Noppadon Pattama violated the constitution regarding a communique{aac} signed with Cambodia dealing with the Preah Vihear temple.

As well, Finance Minister Surapong Suebwonglee and two other cabinet members could be forced to leave the cabinet over the next few weeks for their involvement in the decision by Thaksin Shinawatra's government to approve the two- and three-digit lottery programme. The Supreme Court could accept the case lodged by the Assets Examination Committee as early as next week, which would force the three ministers to vacate office under current law.

''The overall political environment is not very good,'' said Kosin Sripaiboon, a senior vice-president at UOB Kay Hian Securities.

''The anti-government protests under the People's Alliance for Democracy are also expected to continue, and the government has yet to announce any clear plans to reshuffle the cabinet. Investors are just getting out of the market in favour of cash.''

Mr Kosin said the market could fall to as low as 680 to 700 points this month.

Ronnakrit Sarinwong, research head at Adkinson Securities, agreed that politics would dominate the market, but said even if Mr Yongyuth was given a ''red card'' for election fraud, it would take more time before this leads to a PPP ban.

''I think we could see the market rebound next week as companies begin to announce second quarter and first half results. The banking sector is expected to announce strong results,'' he said.

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