The stock market rallied yesterday as investors accumulated shares in expectation that Prime Minister Thaksin Shinawatra would step down and bring an end to the political chaos, analysts said.

On Monday night the caretaker premier vowed he was ready to do anything to end the turmoil. Yesterday afternoon he was granted an audience with His Majesty the King at the royal seaside palace in southern Hua Hin.

Government spokesman Surapong Suebwonglee described their talks as a procedural meeting following Sunday's snap election, but traders were convinced that Thaksin would announce his resignation afterwards.

Yesterday morning, anti-Thaksin protesters offered to cancel the resumption of Friday demonstrations if Thaksin quits, while the Democrat Party promised to join in a new election to be held after political reform has been completed.

The SET Index lost 2.84 points in yesterday's morning session. But in the afternoon when the meeting with the King was publicised, it jumped 11.33 points before settling down to close 6.66 points up at 745.33.

Turnover soared to Bt26.14 billion compared with Bt14.79 billion on Monday. Foreign and local institutions were net buyers of Bt2.14 billion and Bt362.38 million in stocks, respectively.

"The market was up today singly on the assumption that Thaksin would resign. Political uncertainties are now the only factor that can boost the market or bring it down. Until the uncertainties are settled, the SET index could swing 20-30 points," said Warut Siwasariyanon, vice president for research of Globlex Securities.

Yesterday's gain could be short-lived, he cautioned, because even if Thaksin were to leave the scene, investors would remain concerned about the caretaker government and the new prime minister. Their mood will depend on the progress of political reforms. The bourse would move step-by-step, in line with these developments.

"Fundamentally, the index could end the year at 800-900 points, due to the positive

economic outlook as well as the cheap share prices in relation to regional markets."

An analyst from Bualuang Securities said that if Thaksin really packed it in, the stock market could hit 770.

Another analyst from a local brokerage said the market had been driven purely by speculators. "Now, the index is up on good news, but if this assumption does not prove true, the index could tumble."

The political impasse is undermining the economy, as reflected by the slide in the consumer confidence index, and forecasts of weak corporate earnings growth due to the overall economic slowdown as well as waning investor confidence.

Earnings per share of listed companies this year will grow less than 4 per cent, as predicted by some research houses, said Sopawadee Lertmanaschai, executive vice president of the Stock Exchange of Thailand.

Listed firms managed earnings-per-share growth of 13 per cent last year, despite the bird-flu outbreak and skyrocketing oil prices, he said.

"I admit that political uncertainty has eroded investor confidence and the stock market's trading volume is declining," he said.

"However, I believe that the situation will not last long because several parties are seeking the best solution," Sopawadee said. "If the political situation is prolonged, we may have to lower the target for new listings this year down from 100 [companies]."

Siriporn Chanjindamanee

The Nation