Randomly Noted

(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.

Standard Chartered has a note out today titled, “Thailand-Back to square one.” The bank says the weekend protests that caused cancelation of the Asean summit at Pattaya – only to sprawl into the streets of Bangkok and elsewhere - mean additional government economy-boosting measures will get delayed as Prime Minister Abhisit fights for his political life. StanChart seems to think the months since Abhisit took office, in December, had marked an improvement in Thailand’s outlook. It’s a rather naive view, in my opinion. Here’s an excerpt from StanChart’s report: “…Since Abhisit has been spending much effort repairing Thailand’s reputation as an investment and tourist destination following three years of political turmoil, as well as the airport sit-in by pro-Democrat demonstrators (yellow shirts) in November/December 2008. Following several overseas trips, including to Japan and attending the G20 summit in London as the chair of ASEAN, one could argue that positive progress has been made. This in turn made the East Asia Summit another important showcase to confirm that Thailand has returned to normality. ” My view is that Thailand has been stuck at “square one” since September 2006 when the military bosses staged their Thaksin-toppling coup d’etat, ushering in 2.5 years of political instability and, among other things, economic and regulatory missteps along the way. Anyone investing in Thailand since the third quarter of 2006 would have to be naive not to know that the country’s growth would be severely hampered as long as Thaksin continued agitating ex-Thailand amid the peculiarly destabilizing role of an aged Thai King. The country’s economy is shrinking, mainly as a result of the global downturn but aggravated by the country’s political mess. StanChart forecasts a 3.5% contraction. A relevant point in StanChart’s report is their contention that so far monetary easing (interest rate cuts) hasn’t had as much of an impact as hoped. Therefore, any delay in government fiscal measures is doubly regretful. StanChart is “short-term underweight” on the Thai baht but doesn’t expert USD to strengthen versus the THB because of growing risk appetite.  The bank also notes that most foreign funds aren’t particularly engaged in Thailand (probably they know full well the extent of the chaos there.) Thailand’s markets are shut until Thursday due to a national holiday.

DJN reporter Phisanu Phromchanya, covering the Asean meeting in Pattaya, Thailand, sends this dispatch about the anti-government protests which have overtaken this seaside town where leaders of southeast Asian countries are converging this weekend. Note: latest dispatches are at the bottom, so read from bottom up: “Leaders of the Red Shirts making speeches attacking Abhisit (prime minister) government and privy council Prem (adviser to King.) The speech is pretty repetitive. Thanks to the cloudy weather, mob in relatively cheerful mode as they’re not exposed to sunlight in mid-afternoon of summer peak. The pro-Thaksin protesters are calling for fresh election. They said they have nothing against other regional countries. They only want to pressure the Thai government to respond to their request. Police troops are carrying only shields with no batons or other weapons in sight.” Update: “The resort is on a steep hill with access to the beach. There are several battleships in the sea surrounding the resort. The resort is also accessible by helicopter, so leaders may have reached the venue by that means.” Update: “The latest development is the protest leaders gave the government 5 minutes to send a representative to meet them so that they can submit their request. Otherwise they might break in to submit their request to Asean leaders themselves. But it just sounds like a blunt threat to me. Don’t think they’re serious with the threat though.” Update: “Some protesters break into the hotel premises but just stop short of entering the conference center building. The protest leaders now upped their request, calling for representatives of all 10 Asean nations to come out to take their request within 5 minutes. Troops are tightening up security and tensions are on the rise.” Update and Goodnight: “Protesters pulling out for the day but say they may gather up again tomorrow to put pressure on the government.”