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Pending Legal Cases Lead To Investor Angst, Weigh On Thai Assets

THAILAND
EM BulletHomepagemarkets-real-timePolitical RiskPolitical Risk BulletBulletEmerging Market News

The Thai baht clawed back some of its losses from the beginning of the week but remains the second-worst performer in Asia EM space since Friday close. Likewise, the SET Index paused losses overnight, but continued to hover just above four-year lows printed on Monday. Domestic political risk has contributed to this pressure on Thai assets amid piling evidence of tensions within the ruling coalition and the proximity of several key court cases which may have wide-ranging consequences.

  • Researcher and reporter Ken Mathis Lohatepanont recently summarised these key legal cases in an X threat, pointing to the MFP dissolution case (June 12 but verdict may arrive later), the lese-majeste case against Thaksin Shinawatra (the process will start on June 18), PM Srettha Thavisin's ethics case (TBA), and the case on the constitutionality of the new Senate election rules (TBA).
  • Prime Minister Srettha earlier today admitted that the ongoing legal cases against himself, Thaksin, and the main opposition MFP are adversely affecting investor confidence. Separately, the Thai Enquirer quoted Deputy Prime Minister Phumtham Wechayachai as saying that the current political turbulece will only be temporary.
  • As for the potential ramifications of the key legal cases, it should be noted that (1) the MFP is the largest party in parliament and its dissolution would trigger a significant redistribution of relative influence in the legislature; (2) Thaksin remains the dominant figure in the ruling Pheu Thai Party (PTP) formally led by his daughter Paetongtarn; (3) the ethics case against Srettha will determine his eligibility to stay on as PM.
  • Thailand is currently going through the revamped (albeit still extremely complex) process of electing the Senate, which might be fuelling political tensions. The results are expected to be gazetted on July 2. Note that the petition to investigate PM Srettha was filed by a group of 40 outgoing junta-appointed senators, reportedly close to Prawit Wongsuwon, one of the leaders of the former military administration.
  • Indeed, there have been signals that tensions are simmering between rivals-turned-coalition partners from the PTP on the one hand and the military establishment on the other. PTP's Thaksin made a veiled reference to Prawit's alleged role in launching the ethics case against Srettha. The outcomes of pending legal cases may provide some clarity on the situation between the competing networks of influence.
  • Against this backdrop, the Bank of Thailand will deliver its monetary policy decision tomorrow. Our bias is for another on-hold decision, which would be in line with consensus, with the central bank resisting calls from PM Srettha to loosen monetary policy. To see our full preview of the decision, click here.
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The Thai baht clawed back some of its losses from the beginning of the week but remains the second-worst performer in Asia EM space since Friday close. Likewise, the SET Index paused losses overnight, but continued to hover just above four-year lows printed on Monday. Domestic political risk has contributed to this pressure on Thai assets amid piling evidence of tensions within the ruling coalition and the proximity of several key court cases which may have wide-ranging consequences.

  • Researcher and reporter Ken Mathis Lohatepanont recently summarised these key legal cases in an X threat, pointing to the MFP dissolution case (June 12 but verdict may arrive later), the lese-majeste case against Thaksin Shinawatra (the process will start on June 18), PM Srettha Thavisin's ethics case (TBA), and the case on the constitutionality of the new Senate election rules (TBA).
  • Prime Minister Srettha earlier today admitted that the ongoing legal cases against himself, Thaksin, and the main opposition MFP are adversely affecting investor confidence. Separately, the Thai Enquirer quoted Deputy Prime Minister Phumtham Wechayachai as saying that the current political turbulece will only be temporary.
  • As for the potential ramifications of the key legal cases, it should be noted that (1) the MFP is the largest party in parliament and its dissolution would trigger a significant redistribution of relative influence in the legislature; (2) Thaksin remains the dominant figure in the ruling Pheu Thai Party (PTP) formally led by his daughter Paetongtarn; (3) the ethics case against Srettha will determine his eligibility to stay on as PM.
  • Thailand is currently going through the revamped (albeit still extremely complex) process of electing the Senate, which might be fuelling political tensions. The results are expected to be gazetted on July 2. Note that the petition to investigate PM Srettha was filed by a group of 40 outgoing junta-appointed senators, reportedly close to Prawit Wongsuwon, one of the leaders of the former military administration.
  • Indeed, there have been signals that tensions are simmering between rivals-turned-coalition partners from the PTP on the one hand and the military establishment on the other. PTP's Thaksin made a veiled reference to Prawit's alleged role in launching the ethics case against Srettha. The outcomes of pending legal cases may provide some clarity on the situation between the competing networks of influence.
  • Against this backdrop, the Bank of Thailand will deliver its monetary policy decision tomorrow. Our bias is for another on-hold decision, which would be in line with consensus, with the central bank resisting calls from PM Srettha to loosen monetary policy. To see our full preview of the decision, click here.