Stock investors yesterday hailed the Constitution Tribunal ruling dissolving the Thai Rak Thai Party and banning 111 of its executives from politics, driving the main market up 2.24 per cent to a one-year high.

Foreign investors bought Bt8.14 billion in local shares. Overall turnover was Bt40.38 billion, the heaviest level since December 20.

As a result, market capitalisation was increased to Bt5.7 trillion from Bt5.5 trillion on Wednesday.

The SET Index was busy from the bell and chalked up an intra-day high of 754.76 before closing at 753.93.

Bank and brokerage issues led the gains. Kim Eng Securities surged 17.11 per cent to Bt21.90, Asia Plus Securities rose 11.54 per cent to Bt3.48 and Phatra Securities jumped 8.59 per cent to Bt44.25.

Siam Commercial Bank was up 6.52 per cent at Bt73.50, Bangkok Bank added 5.26 per cent at Bt120 and Kasikornbank was 4.41 per cent to the good at Bt71.

JP Morgan Securities president Marco Sucharitkul said it recommended investors should take profit and slow buying in order to digest the situation. There is still anxiety over the constitution and uncertainty following Thai Rak Thai's dissolution.

"We view the court ruling as reducing political uncertainty over the medium term and bringing Thailand one step closer to the political stability needed to lift sentiment and domestic demand in 2008," Credit Suisse said in a report.

Although investors are positioning themselves for an economic recovery next year, political uncertainty will continue to cloud the outlook and limit market gains until a new constitution is adopted and it is clear elections can be successfully concluded, an analyst was quoted by Dow Jones Newswires as saying.

Far East Securities investment strategist Veerach Kongsamsee said confidence in politics had improved.

"However, investors should keep an eye on voting on the new draft constitution - an issue they are worried about," he said.

Siam City Securities assistant managing director Sukit Udomsi-rikul painted a rosy picture and expected the SET Index to reach 760-780 points by the end of the year, before hitting 840-850 points next. This prediction relies on elections being held later this year.

The National Legislative Assembly has a mandate to finalise the charter draft by July 5, and to write related laws governing electoral procedures and political parties by August 18.

A simple majority yes-or-no national referendum will be held by September 3.

If the charter is approved, elections will be held on December 16 or December 23 and a new government formed in January.

If the charter fails at the referendum an earlier constitution will be chosen, amended and enacted within 30 days and elections held in December or January.

However, investors will watch closely for agitation from so-called undercurrents, or supporters of the former Thai Rak Thai Party, Sukit said.

"One week from now we will have to consider whether there is political movement from Thai Rak Thai Party and its supporters - it might have a psychological impact on the stock market," he said.

Siam Commercial Bank executive vice president Veerathai Santipraphob said existing parties should suggest an economic road map to build confidence.

Investors hope a new government will bring economic improvements. Meanwhile, the clearer political picture will restore investor confidence.

"The next government should pay attention to an economic agenda as its first priority, in order to build confidence. A general election will be a key factor in improving people's confidence," he said.

However, he believes economic fundamentals remain strong, particularly exports. Raw-material imports show good growth, reflecting a positive sign for exports and manufacturing in the coming three to six months, he added.

Veerathai expects gross domestic product to grow between 3.5 per cent and 4 per cent this year.

Kasikorn Research Centre said in a note that the court ruling would boost private-sector confidence and spending would increase.

Improved confidence, lower interest rates and government spending will boost growth to 4-5 per cent in the second half of the year from 3-3.5 per cent in the first, it said.

Siriporn Chanjindamanee,

Somruedi Banchongduang

The Nation