A Standstill Thailand

Neither party wants to budge. The stake at hand is large and it is oversimplification to view the current saga as a conflict of interest between Red Shirts and current government. Royal family has been dragged into this mess as part of preparation of power transfer, likely to Crown Prince Vajiralongkorn and the coming promotion in army in October following the retirement of Army chief Anupong Paochinda. The violence and the ongoing presence of protestors on the streets of Bangkok will stress Thailand’s current institutional framework to its full limit.

I could not discount the possibility of a violent confrontation between Red Shirts and government security forces, as both parties are building up their arsenal. Army chief talked tough and the stage seems set for operations to remove the red-shirted protesters from the Rajprasong intersection as the military boosted its forces while the protesters were in defensive mode yesterday, erecting barricades and assembling home-made weapons for the next battle. There are as many as 10,000 troops in position now in the areas near Rajprasong, the main protest site. source said the protesters also have M67 grenades, M79 grenade launchers and rocket-propelled grenade launchers. They also seized many assault rifles from the military during the clashes with security forces on April 10 at Khok Wua intersection, the sources said. Of the 500 Israeli-made Tavor Tar-21 assault rifles seized by the protesters on that day, only 200 were returned to the Army, the source said, suggesting the protesters might use the weapons in the next clash.

Crown Prince Vajiralongkorn rumored to be closely associated with former Prime Minister Thaksin and people have privately asked whether he has the natural authority to unify the nation, especially given his partisanship towards the military.

One should not also forget that commander-in-chief Anupong is going to retire soon and it is not too hard to see round of jockeying for positions among those in line of command. Military support for Prime Minister Abhisit and its ruling coalition may not be as committed as before, and if current government is losing its monopoly of the use of the force, PM Abhisit’s days in power would seem to be numbered. The Red Shirt protestors know this and those with long patience will win.

Early elections remain a remote possibility and at this stage, it would a task for royal intervention, especially so when His Majesty the King who is still recuperating at Siriraj Hospital.

For now, portfolio managers are taking a neutral stance, at best with portfolio rebalancing with a domestic flight to safety but if situation turns violent given the current political divide, this could lead to a clear reversal of previous Thai equity market outperformance.