ANALYST: The Markets Might Actually Welcome The Thai Coup

Thailand stock exchangeREUTERS/Chaiwat SubprasomThai Buddhist monks walk past the Stock Exchange of Thailand building in Bangkok.

The ongoing political turmoil in Thailand went to the next level this morning as the army took to the airwaves and announced it was taking over.

The markets are taking the news in stride.

In a quick reaction note to clients, Capital Economics’ Mark Williams says the “Thai coup may be welcomed by markets.”

“The coup reduces uncertainty about the immediate outlook and, in particular, the possibility that the political standoff would turn much more violent,” said Williams. “For these reasons it could actually be positive both for Thailand’s economy and financial markets in the near term.”

The Thai stock market closed before the announcement. The Thai baht, which continues to trade, is down only marginally.

For Williams, any positive reaction in the markets is likely to be short-term in nature.

“[T]he coup seems unlikely to bring a lasting solution any closer,” he said. “After Thaksin was ousted in 2006, the military allowed elections to take place in December 2007. These were won, as every election since 2001 has been, by Thaksin’s supporters. Similarly, any return to democracy in the near future would almost certainly hand power back to the same group. In the meantime, the military’s seizure of power does nothing for Thailand’s reputation among global investors, or indeed tourists.”

It seems the army has only bought the country some time.

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