A few minutes before 6:00 a.m. ET, the Thai army interrupted all of local TV programming to announce it was assuming power.
It’s a military coup.
This comes two days after the military declared martial law.
By default, you might think this means chaos in the financial markets.
But judging by the markets subdued initial reaction, it doesn’t seem like that big of a risk event. The Thai baht weakened barely against the dollar (see chart). The news came minutes after Thailand’s stock market closed; the SET index climbed 0.16% today.
There’s at least two reasons why today’s news isn’t rocking markets. One, the country had already been in chaos. Months of anti-government protests had already left 28 people dead and saw the ouster of Prime Minister Yingluck Shinawatra.
Two, military coups happen frequently in Thailand. “The Thai military has staged 18 successful or attempted coups since 1932,” noted BI’s Michael Kelley.
Earlier this week, a couple of analysts addressed the Thai army’s declaration of martial law. Here’s some of what was said.
Derek Bloomfield, Deutsche Bank: “Silver lining aspects of military intervention … We attribute this to: 1) immediate uncertainty regarding politics is suddenly diminished (even as medium-to-longer term uncertainties remain the same or even heightened), and 2) military deployment quells risk of large-scale protest groups from either or both rival camps from assembling and causing widespread damage.”
Krystal Tan, Capital Economics: “The optimistic view is that the army’s goal is to use martial law as a way to force the opposing political factions to reach a compromise agreement that can lead to the creation of a functioning government with popular support. The caretaker government is calling for elections to be held on 3rd August, after the Election Commission recently said that political unrest has disrupted preparations for a July vote.”
Poramet Tongbua, Bualuang Securities: “We believe the market will react positively to the announcement, anticipating that it will presage some sort of resolution of the prevailing political gridlock and government dysfunctionality. But SET upside could be limited in the short-term; it will depend on what happens next.”
It’s certainly jarring to see a country’s army general announcing on TV that the military is taking control. But in a country where the alternatives are widely understood as being worse, you can begin to understand why panic isn’t ensuing.
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