Thai shares falls 1.33% on political concerns

Analysts issued stern warning that political tensions would deepen if Samak took office again.

The SET index moved in a narrow range in the first trading session despite the steep fall in other stock markets in Asia region on worries about Lehman Brothers' hefty losses.

The Thai bourse's loss widened after reports during the lunch break that Samak had accepted the PPP's invitation to reinstate him as the premier. It closed at the day's trough of 646.80, a little above the year's low of 645.80 on September 5.

Turnover was thin at Bt9.17 billion.

Foreign investor selloff was still seen yesterday, with a net position of Bt1.76 billion. Foreigners this year have so far sold Thai shares with a net worth of over Bt100 billion.

Sukit Udomsirikul, Siam City Research Institute assistant managing director, said conflict would continue if Samak were reinstated as prime minister and this would dampen stock market sentiment.

Investors should wait for the resolution of the Parliament meeting scheduled today to see if members will endorse Samak, he said.

The Constitution Court on Tuesday disqualified Samak for violating the charter with his cooking show.

"It is hard to predict the political course right now but I believe there will be a happy ending and no violence. However, the chronic political turmoil will hurt the overall economy," Sukit said.

An analyst at Syrus Securities said investors should closely watch the political situation after the PPP announced its support of Samak as prime minister again.

If the coalition parties endorse Samak, it will inflame those who oppose him, and the situation could escalate, the analyst said.

Investors are advised to hold as much cash as possible, the analyst said.

Another analyst at a local broker said opposition would escalate if Samak was appointed as prime minister again.

"The political situation will remain in a vacuum until it is clear who the new prime minister will be," the analyst said.

ML Thongmakut Thongyai, the head of equity at Citicorp Securities (Thailand) and president of the Foreign Brokers Association, said if Samak were reinstated as prime minister it would be a risk factor and hurt foreign investors' confidence, which is already fragile.

"Now there is no way out for local politics. The state of emergency declaration has whittled down foreign investors' appetite for Thai shares," he said.

If Samak takes power again, the situation will escalate, he said, adding that foreign investors had anticipated that Samak would be out once the Constitution Court disqualified him.

"News that Samak is to be reinstated would not be welcomed by foreign investors. If the people's protest is widened, foreign investors will slow down their investment in Thailand," he said.