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When the Red Shirt protest leaders called off their rally and surrendered to police on Wednesday, hopes for a return to order in Bangkok. But instead an already tense situation in the Thai capital escalated rapidly, as hard-line protesters set fire to the country’s stock exchange, shopping malls, and a television station. The Associated Press was reporting that at least six people had been killed and nearly 60 injured. Thai authorities announced an 8 p.m. curfew as part of a campaign to gain control over anti-government forces who had refused surrender (see Three Country ETFs High On Risk).

Smoke was seen billowing from the headquarters of the Stock Exchange of Thailand on Wednesday, as militants took aim at financial and commercial institutions in Bangkok. Earlier in the day, the Red Shirts had called off their protests of the army-backed government as the death toll continued to climb. “We know this decision will pain you,” said Jatuporn Prompan from the protesters’ main stage. “But we have to stop the death, even though our fight will carry on.”

Thailand ETF Holds Its Ground

The violence in Bangkok has created a unique situation in the country’s stock markets, essentially forcing traders underground. Trading has been taking place at a separate, undisclosed location in recent days, so the attacks on the Stock Exchange had minimal effect on investors. Still, officials announced that the stock market would be closed on Thursday as the government attempts to regain control of the capital.

Surprisingly, the iShares MSCI Thailand Index Fund (NYSEARCA:THD) was trading almost 1% higher on Wednesday afternoon, reflecting optimism among investors that the Red Shirt surrender will quickly lead to a resolution of conflicts that have plagued the country in recent months. The Red Shirt protesters are mostly supporters of ousted populist leader Thaksin Shinawatra. The anti-government groups have alleged that the current administration has used its cozy relationship with the army to retain power, and have called for immediate democratic elections.

Although THD shrugged off the chaos on Wednesday, the conflicts have taken their toll on the Thailand ETF in recent weeks; THD is down about 4% over the last week (see THD’s returns). Still, the fund is up about 7% on the year, as a bullish economic outlook has propelled the rapidly-expanding Asian nation. Many analysts view a speedy resolution to the current situation as vital to the country’s economic growth. As tourists have steered clear of Thailand at the urging of governments around the world, hotels and restaurants in Bangkok have seen their business dry up. Although the damage has largely been limited to the tourism sector to this point, investors worry that a drawn-out conflict would begin to weigh on the rest of the Thai economy as well.

Disclosure: No positions at time of writing.

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Source: Thai ETF Jumps on Peace Hopes