"Concerns would be heightened if the attacks prove to be an escalation of the separatist insurgency -- though neither the identity nor the motive for the latest attacks are known at this point -- or if the attacks signal the onset of a violent backlash from the September military coup," said Moody's Vice President Thomas Byrne. Moody's has said that a sustained escalation of separatist violence outside the southern border provinces would be a negative credit factor for the country.

Byrne said that Thailand's external payments and fiscal positions have improved significantly since the 1997 financial crisis, insulating the sovereign from shocks and supporting the Thai government's Baa1 bond ratings. The budget has been balanced or in surplus since 2003, international reserves have risen above $64 billion, and foreign direct investment has swollen to record levels in the last two years with net inflows of more than $8 billion through the first 10 months of 2006.

"An escalation of violence that deters new investment in Thailand would have negative implications for Thailand's credit fundamentals," said Byrne. "More broadly, a shift by the post-coup leadership in economic or political policies that makes the investment climate less hospitable than under the Thaksin administration would also have negative credit implications. Byrne added that a restoration of confidence in Thailand's democratic and constitutional institutions would help underpin economic and financial stability in Thailand over the long run."

Moody's affirmed its investment-grade ratings for Thailand on Sept 20 in the wake of the coup. They include:

Foreign and local currency government bond ratings: Baa1

Foreign currency country ceiling: A3

Foreign currency deposit ceiling: Baa1

Local currency deposit ceiling: Aa2

Local currency bond guideline: Aa2

The outlook for Thailand's sovereign ratings is sta

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