Stock-market analysts have welcomed the government's desire to reopen negotiations with the red-shirt protesters but urged it to deploy its strategy quickly, warning a prolonged rally could ruin the Kingdom's long-term economic fundamentals.
Following yesterday's address by Korbsak Sabhavasu, secretary-general to the prime minister, to the annual conference of the Securities Analysts Association, association president Paiboon Nalinthrangkurn said it was heartening to be convinced negotiations remained part of the government's agenda.
Paiboon, who is CEO of Tisco Securities, said closing the door on negotiations would induce negative consequences, particularly from foreign communities.
"It's a positive sign that the government will try to open another round of negotiations. We hope this yields a successful result. The government itself has yielded to the request for House dissolution, leaving open the right timing," he said.
Korbsak told the analysts Abhisit believed negotiations were the country's best option, because dispersing the protesters would not solve the problem in the long term.
He also said the government would soon conclude measures to help business-owners and employees affected by the prolonged rally.
Of 40,000 workers affected, 10 per cent belong to 10 hotels that have been temporarily closed. The rest work in offices and shops in the Rajprasong area.
He said the measures should be discussed by the Cabinet next Tuesday. Help could include debt-repayment rescheduling or extra loans from commercial banks with government support. Still to be discussed is the scale of impact and the period over which it has been felt.
Paiboon said the short-term political effects of the turmoil were not worrisome, because the Thai economy now enjoyed a big boost from the global economic recovery.
However, the long-term impact was a concern, because foreign direct investment could be pressured. In the past two years, such investment has fallen 30 per cent per annum from the political instability.
The number of foreign investors looking for long-term gains in the capital market, by investing in the likes of pension funds, has dwindled. Most investment is now for short-term gains, which leads to volatility.
"Ten years ago, long-term foreign funds were huge. Political stability allowed them to plot investment strategies. Now they're turning to other Asian markets, such as Indonesia," Paiboon said.
Thanachart Securities executive vice president Pichai Lertsupongkit, who is an SAA director, said there was nothing new in Korbsak's speech apart from reaffirmation of the desire to solve the crisis peacefully.
He said it was certain the longer the government took to solve the problem, the more the economy would be battered, and the vicious cycle would return if social division remained unsolved. This will lead to political instability and higher investment costs for domestic and foreign investors.
"For every month that the rally continues, half of one percentage point will be shaved off the country's gross domestic product," Pichai said. "The scariest thing is it is unknown how long this will continue. It's a shame. Over the past 30 years, the economy has expanded 5 per cent [per year] on average, thanks to stability. Now, stability is our only hope."
Another SAA director, Bualuang Securities executive vice president Chaiyaporn Nompitakcharoen, said a peaceful solution indicated it would take some time for the instability to end.
If the rally continues for three months, it is certain that the economy will slow down and foreign investment will drop in the latter half of this year, he said.
"Without a foreseeable solution, foreign investors are ready to move to any well-performing market in the region," Chaiyaporn said.
