The New York Times's reports that some shopping malls in Thailand were closed for a third day on Monday, and 43 bank branches in Bangkok were shut as the economic toll of the protests rose.
Even more troublesome, on the outskirts of Bangkok protesters broke into the headquarters of the election commission building demanding the acceleration of an investigation into charges that a large Thai company made a multimillion-dollar payment to the governing party.
What is going on and why does the political upheaval in Thailand seemingly never end?
You have probably seen the pictures of the ongoing political turmoil in Thailand with the red shirts (backer of Thaksin and largely rural) doing all they can to force out the current Prime Minister Abhisit Vejjajiva thereby forcing new elections. The army and the aristocracy seems to be firmly in the camp of the prime minister who just took command 15 months ago.
It seems that Thailand’s twice-elected and now fugitive former prime minister, Thaksin Shinawatra, has the numbers on his side but his excesses led to the army ousted him in 2006. Thomas Fuller of the NYT notes that Thailand is a country of 145,000 Mercedes Benz sedans and about 75,000 villages that struggle economically. Mr. Thaksin injected liquidity and hope into these villages which is why they are his most loyal followers.
The social glue that the country together despite these wide disparities of income and power, deference, graciousness and politeness – are coming unraveled. Technology is also having an impact. In 2005, after four years of Mr. Thaksin as prime minister, the number of people using mobile phones in the vast, rice-growing northeast had more than doubled to 5.3 million.
After the coup in 2006 and through the global financial crisis, debt levels in the northeast doubled to an average of about 100,000 baht, or just over $3,000, per family. This is a lot of money and rural incomes have stagnated leading to the political unrest.
In a sentiment that would warm the heart of any Radio Free Asia supporter, a mother of two at a recent political rally put it this way: “I used to think we were born poor and that was that but I have opened my mind to a new way of thinking: We need to change from the rule of the aristocracy to a real democracy.”
Meanwhile, it seems puzzling that King Bhumibol Adulyadej, at 82 the world’s longest- reigning monarch, does not seem to have the power to settle this political mess. But the king’s health and his power are receding setting up a free for all that has consequences for the country and its stock market. When a large Thai brokerage polled fund managers about political risk factors in 2010, 42% of respondents chose what the brokerage describes as “a change that cannot be mentioned”.
Rumors of King Bhumibol’s death last October sparked a two-day equities sell-off.
Few have known any king other than Bhumibol, who ascended in 1946 and became a power broker through his personality and talented staff. Unfortunately, the thought of designated male heir Crown Prince Maha Vajiralongkorn, aged 57, is not comforting based on his reputation.
So even though the Thai ETF (NYSEARCA:THD) has held up well during the recent upheavals and is relatively cheap on an earnings basis, the death of the King will rock markets so a yellow shirt of caution is in order. Still when you look at the Thai market trading at 13 times trailing earnings compared to Peru (NYSEARCA:EPU) at 37 times or Poland (NYSEARCA:PLND) at 57 times earnings, Thailand looks like a pretty conservative bet for an aggressive emerging markets investor.