Scenarios: How is Thailand’s crisis likely to play out?

By Martin Petty

BANGKOK (BestGrowthStock) – Thailand’s military has vowed to get tough on anti-government protesters who say they will occupy a luxury hotel and shopping district “indefinitely”, raising the risk of another violent confrontation.

Attitudes have hardened on both sides since troops and protesters clashed in Bangkok on April 10, killing 25 people and wounding more than 800 during a chaotic army crackdown that has intensified a five-year political crisis.

Following are scenarios about what could happen next.

TROOPS TRY TO BREAK UP PROTEST TRIGGERING VIOLENT CLASHES

The army says it will use force if necessary to take back the main protest site at the Rachaprasong intersection and has warned that could cause casualties.

Troops would likely move in at night, encountering red shirt guards blocking the main entrances to the site, while swarms of protesters join in. Soldiers, unable to drive through streets blocked by cars and trucks, throw tear gas and fire rubber bullets at demonstrators, who stand firm.

As in the April 10 crackdown, shadowy gunmen may appear and open fire with assault rifles and grenade launchers. Panicky troops open fire on the crowd, with significant casualties.

The military is unable to secure the sprawling protest base, surrounded by concrete pillars, bridges, shops, tents and an elevated rail track. Troops withdraw. The protest continues.

PROBABILITY: This is a likely scenario given the huge political stakes, the commercial significance of the location and the military’s tough new stance.

MARKET REACTION: Stocks and the baht would slide. Ratings agencies would consider another downgrade for Thailand. Long term investments would go on hold.

ARMY SECURES PROTEST SITE, RED SHIRTS REGROUP ELSEWHERE

The military moves in unannounced during the early hours of the morning when the number of demonstrators is considerably lower than in the evening and daytime. Clashes ensue, causing some casualties. But the crowd is small, and the soldiers are able to overcome “red shirt” guards.

The military surrounds the site in huge numbers. Many protesters agree to leave, others are chased away by troops, who secure the site and establish a perimeter. The government swiftly announces it has taken control.

Protest leaders vow to regroup. After a flurry of phone calls and text messages, and “red shirt” radio issuing a call to mass at another site, thousands begin a new demonstration elsewhere.

PROBABILITY: This is the second-most likely scenario.

MARKET IMPACT: The resilient bourse falls, but there is no mass selling. However, investors are aware this is a quick-fix and not a long term solution and many remain on the sidelines.

GOVERNMENT, PROTESTERS AGREE TO RESUME TALKS

Prime Minister Abhisit Vejjajiva is eager to avoid bloodshed and offers to restart talks with no preconditions. The protesters accept. This takes the heat off a tense situation and allows all parties some breathing space.

However, neither side has anything to bring to the table. Abhisit and his backers refuse to agree to a shorter timeframe for holding an election and the talks collapse.

The protesters remain defiant and their rally continues.

PROBABILITY: The two sides are unlikely to even hold talks, let alone come to any agreement. The government has accused the “red shirts” of harboring “terrorists”, and they in turn have branded the government “murderous” over the April 10 clashes.

MARKET IMPACT: Thai stocks would rally briefly, if the two sides agreed to talks, and the market, one of Asia’s cheapest, might see several days of gains during the cooling-off period, before falling again when the talks inevitably collapse.

CLASHES OCCUR, ABHISIT DISSOLVES HOUSE, ARMY STAGES COUP

The army’s attempt to break up the protests results in heavy bloodshed. Abhisit’s position becomes untenable. He defies his military and establishment allies and dissolves parliament.

Aware polls would almost certainly return a government allied with ousted former premier Thaksin Shinawatra — the de facto “red shirt” leader despised by the establishment elites — the military stages a coup saying it is upholding national security and protecting the revered king.

PROBABILITY: Highly unlikely. Abhisit is showing no signs of wavering. He needs the military as much as they need him and both are determined to keep Thaksin at bay and prevent early polls.

MARKET IMPACT: Stocks would plunge after massive foreign selling, and the baht would weaken. Concerns about fiscal mismanagement, poor governance, and a public backlash — even civil war — would curtail long-term investment. Thailand’s credit ratings would be downgraded.

Stock Market

(Editing by Bill Tarrant)

Scenarios: How is Thailand’s crisis likely to play out?