Thai petchem shares slump after military takeover of government

Nurluqman Suratman

23-May-2014

By Nurluqman Suratman

Thailand army chief - General Prayuth Chan-ocha (centre)SINGAPORE (ICIS)–Shares of major petrochemical firms in Thailand slumped on Friday morning, after the country’s army chief, General Prayuth Chan-ocha, seized control of the government on Thursday and declared himself as the acting prime minister.

At 12:30 hours Bangkok time (05:30 GMT), PTT Global Chemical (PTTGC) was down by 1.09%, Siam Cement Group fell by 1.46% and Thai Oil was 0.97% lower.

The benchmark Stock Exchange of Thailand (SET) index was down by 1.44% at 1,384.96, off a low of 1,376.67, which was the lowest since 12 May.

On Thursday, the benchmark index closed 0.16% higher before the coup was announced. Thailand-listed polyesters major Indorama Ventures Ltd (IVL) bucked the downward trend in share prices, rising by 1.22%, while PTT Group was 1.62% lower.

The Thai military assumed power two days after it declared martial law in the country on 20 May, with Prayuth saying that the military had to intervene in order to quell six months of turmoil and violence.

The army suspended the Thai Constitution and banned gatherings, with opposition protest leader Suthep Thaugsuban and pro-government protest leader Jatuporn Prompan detained.

The military’s intervention prompted international criticism, with US officials condemning the takeover and warned that they were reviewing military and other assistance to Thailand.

US Secretary of State John Kerry said there was “no justification” to the coup, warning that the US’ $10m aid to Thailand could be suspended.

Germany and France also condemned the coup, while UN Secretary-General Ban Ki-moon said in a statement that he was “seriously concerned by the military takeover”.

While the military coup is expected to reduce uncertainty in the near-term, the long-term costs are still unclear, according to analysts.

“It brings lasting resolution of the political conflict no closer and further undermines the development of the effective institutions that over the medium term promote strong economic growth,” economists at Capital Economics said.

“Prolonged political uncertainty in Thailand has clearly taken a heavy toll on the economy, which contracted in the first quarter of the year. Unless a resolution to the political crisis is found soon, GDP growth in the second quarter may not be much better,” they said.

Thailand’s economy shrank by 0.6% year on year in the first quarter of 2014, registering a quarter-on-quarter contraction of 2.1%.

Exports fell by 0.4% year on year, while imports shrank a steeper 8.5% in the first quarter.

Analysts are scaling down their GDP growth projections for Thailand following recent developments.

Credit ratings firm Moody’s analyst Thomas Byrne told Channel News Asia in an television interview that the Thai economy is now expected to grow between 1.00-2.00% this year, much lower than earlier projections of a 4.0-4.5% expansion before the coup.

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

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