BANGKOK -(Dow Jones)- Intensifying political tension in Thailand that has led to a state of emergency being declared in Bangkok and surrounding areas will likely put pressure on local stocks in the short-term, analysts said Thursday.
As it becomes more likely that the government might either use force to disperse anti-government protests or succumb to demands that an election should be called sooner than planned, investors may abandon Thai assets to limit risk from the uncertain situation.
"We could see the stock index fall by 5-10 points as the state of emergency declaration will likely pressure foreign investors to turn to sell shares in the short-run," Asia Plus Securities said in a note Thursday.
The Stock Exchange of Thailand Index ended Wednesday up 0.6% at 812.63 points. The index has surged 16.7% since the end of January, mainly on buying by foreign investors who see Asia as having big growth potential.
However, market watchers say that while the situation remains under control with a peaceful conclusion still possible, the market is unlikely to see sharp declines.
Despite the state of emergency announcement, acting government spokesman Panitan Wattanayagorn said Thursday the government has no plan to use armed force to dismantle the demonstration.
"I think any downside would likely be limited as things will likely remain peaceful. If violence was going to emerge, it would probably have happened last night right after the state of emergency declaration," said BFIT Securities strategist Aphisit Limsupanark.
If the SET Index can remain above 795-800 points on Thursday, there is a good chance that it could soon rebound to test the 820 resistance again, he said.
Tens of thousands demonstrators have gathered in central Bangkok since March 12, demanding a snap election. After negotiations with the government last week failed to reach any resolution, protesters stepped up pressure by blocking off a key business intersections where several luxurious shopping malls and five-star hotels are located.
Some protesters Wednesday forced their way into Parliament, forcing several ministers to evacuate by helicopter, but the crowds retreated shortly afterwards.
Some analysts noted that the state of emergency is the very last tool the government can use against protesters. If that strategy doesn't work, then the dissolution of parliament might be the only option left.
Copyright 2009 Dow Jones Newswires
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