BANGKOK – Thailand’s post-coup share rally surged to new highs on Tuesday as investors bet the military junta’s crackdown would enforce calm and uncork spending blocked by more than six months of political turmoil.
The country’s benchmark Set index climbed 0.9 per cent to be more than 2.5 per cent up since the May 22 coup – and almost 18 per cent since a street demonstration campaign aimed at bringing down the government approached its January peak.
The relief rally shows a continued faith in “Teflon Thailand”, with share buyers apparently giving a heavier weighting to still solid corporate profits than to worrying economic trends – or the failure of a previous military takeover to resolve the country’s long-running political crisis.
The relief rally took the Set to its highest level in more than six months amid relative calm in the country after last month’s putsch. The military has clamped down hard, detaining opponents, censoring media and banning the few scattered protests that have popped up.
Business people have also been encouraged by signs the junta is unblocking government spending in areas from agricultural subsidies to infrastructure projects, which the ousted administration could not carry out because it was paralysed by opposition protests and hostile legal and regulatory institutions.
The military also says it will revive the country’s Board of Investment, which has decisions on more than $20bn of foreign and domestic projects on ice.
The coup has already helped turn round one of the economic indicators that had gone into a tailspin: consumer confidence rose in May, after 13 successive months of decline, according to figures published Tuesday by the University of the Thai Chamber of Commerce. Investors appear focusing once again on the resilience of the Thai economy and corporate profits to past political crises.
But the longer term picture reveals a more ambivalent investor view of Thailand. Stocks are only now returning to their level before an opposition campaign of street protest against the now ousted government began in November – and they are still more than 12 per cent off a high of just over a year ago.
There is plenty beyond politics to darken the picture. The economy could well fall into recession this quarter, while consensus corporate earnings forecasts have been revised down by 8 per cent for 2014 and by 6 per cent for 2015, according to figures from CIMB.
Then there is the record of past juntas on the economy. The latest military rulers have appointed as an economic adviser Pridiyathorn Devakula, a former central bank governor who played the same role after the last military coup in 2006. One of his early acts then was to oversee the introduction of strict capital controls – and then reverse course after the stock market plunged 15 per cent in a day on the news.