(This is a Money Talks column that first ran on Dow Jones Newswires earlier Wednesday)
Thailand is not the new Indonesia but the speed with which the country’s financial markets have calmed down over the recent political upheaval is encouraging.
Political ups and downs are nothing new for Thailand. Recent years have seen the ousting of former prime minister Thaksin Shinawatra, a military coup and frequent protests, and that’s kept investors away, leaving a hardy core of players.
The country’s been off the radar for many global fund managers for a while. Those who have been prepared to put money into Thailand in the first place know the risks involved and are prepared to take them.
That’s why we saw Thailand’s share market jump 5.4% Tuesday, while foreign investors were net buyers of THB1.38 billion worth of shares Monday, the first time they have been net buyers in five sessions. So far Wednesday, the index has slipped 0.2%.
The market had fallen 3.6% Monday last week, and–after a three-day market holiday–another 3.3% Friday, in response to the outbreak of violence between the armed forces and anti-government protesters known as Red Shirts, many of whom are allied with Thaksin.
Things have calmed since, though the protesters have pledged to continue their rally into May, and still demand Prime Minister Abhisit Vejjajiva dissolve parliament and call new elections.
But as players turn optimistic and markets look sharper (the U.S. dollar has fallen to a 23-month low against the baht, apparently leading to central bank intervention to try and curb the baht), the real question for Thailand going forward is longer-term money and whether funds that have previously skirted the country decide it’s time to park money there.
Bangkok must be looking at the investment renaissance that’s taking place in Indonesia with some envy.
Indonesia has not only managed to retain its core of investors, but also draw in fresh money from those who had previously given the country a miss. That’s in no small part due to the relative political stability in Indonesia these days, compared at least to Thailand and with elections coming up in the Philippines.
Thailand though is still some way from being a draw for funds that have avoided it in the past.
For that to happen there needs to be greater continuity in political leadership and for that leadership to put clear strategies in place to entice in foreign money for projects and development, not just markets, and for building domestic demand.
The current political uncertainty, as well as the tendency for Thai leadership in the past to make sudden and counterintuitive policy changes, will keep many funds out for some time yet.