Investors greet Thaksin's ascension with buying spree

By Nic Hopkins and Nina Suebsukcharoen
CNN Interactive Writers

BANGKOK, Thailand (CNN) -- Financial markets have welcomed news of a likely win by Thaksin Shinawatra's Thai Rak Thai party in the Thai general election, pushing share prices sharply higher.

The nation's barometer SET share index rose 13.24 points to 300.00 Monday and the Thai baht rose by almost 1 percent against the U.S. dollar, despite warnings that uncertainty over the make-up of the new government would last some weeks.

It was the first time in two months the SET had been at 300 points or above, with most of the buying emerging in the financial services sector. Other share markets across Asia were less upbeat in the wake of losses on influential U.S. markets at the weekend.

Leading the run of Thai stocks moving higher were bank shares, which rose 9.6 percent and accounted for 30 percent of all trade on the market.

Meanwhile, foreign exchange dealers say the U.S. dollar fell to be worth 42.7 Thai baht, down from 43.18 on Friday.

Baht improves

"The election result seems relatively simple, against the expectation in the lead-up of a more complicated situation. The baht has improved as investors have removed some of that uncertainty," says BNP Paribas currency analyst Clifford Bennett.

A dealer at Credit Agricole Indosuez says buying had emerged from the private sector, particularly oil companies, in afternoon trading.

Salomon Smith Barney chief economist Don Hanna says the election result is not so much a surprise as the margin that is emerging in Thaksin's favor.

"The general expectation was that they would get a plurality, but it looks as though they may have got a majority," he says. "If they have to have a coalition it will probably only have to be with one other party, which creates a greater sense of stability."

Bonds firmer

The expectation of more stability saw government bond prices rise and yields, which reflect where investors think interest rates will be in the future, fall slightly.

Analysts say investors favored both of Thaksin's two leading candidates to take the role of finance minister. One is Bank of Thailand governor Chatumongkol Sonakul, and the other is Bangkok Bank chief executive Kosit Panpiemras.

Thaksin has said that by January 11 he hopes to form a coalition government controlling about 320 seats in the 500-seat lower House of Representatives.

More uncertainty

There still is, however, uncertainty over Thaksin himself. The prospect remains that Thaksin may win government but be forced to step down if the Constitutional Court upholds a ruling by the National Counter Corruption Commission that he concealed assets while serving in a previous government.

Thai Rak Thai, or Thai Love Thai, is a blend of career politicians wooed by Thaksin from other parties and younger members making their first appearances in parliament.

"The issue is that the party is focused very much around Thaksin, its leader and founder, and the man who attracted many of these MPs away from other parties," says Don Hanna.

"Because of that fact there's a level of fear over its ability to govern if Thaksin can't hold a political post."

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