Thailand petrochemical shares fall as army declares martial law

By Pearl Bantillo

SINGAPORE (ICIS)–Shares of petrochemical companies in Thailand were trading lower on Tuesday following a declaration of martial law in the southeast Asian country that has been beset by political crisis for more than six months.

At 13:00 Singapore time (05:00 GMT), PTT Global Chemical fell 0.72%, while its parent firm PTT was down 0.65%. Siam Cement Group (SGC) edged 0.97 % lower, while Integrated Refinery and Petrochemical Complex (IRPC) declined 1.64 %.

The Stock Exchange of Thailand (SET) index slipped 13.01 points or 0.92% at 1,400.63.

Thailand’s army declared martial law at 03:00 Bangkok time (20:00 GMT) on Tuesday “just to restore peace and stability”, newswire agency Reuters quoted military spokesperson Winthai Suvari.

The country has been battling with political unrest since November last year that culminated in the ouster of Yingluck Shinawatra as prime minister early this month via a ruling by Thailand’s Constitutional Court.

With its capital – Bangkok – being inundated by anti-government protests for months, Thailand had to move the venue of the 2014 Asian Petrochemical Industry Conference (APIC) to the beach resort of Pattaya. APIC was held on 15-16 May.

Thailand is scheduled to hold a general election on 20 July, but there are concerns that this may be delayed following recent attacks at a polling site, according to media reports.

Threats of protests from opposing political parties in Thailand may have prompted the military to step in.

But the army made it clear that its martial law declaration is not a coup against the caretaker government under acting Prime Minister Niwattumrong Boonsongpaisan, former deputy of Yingluck and is also from the ruling Pheu Thai Party.

Anti-government protesters are demanding the Thai Senate and courts to install a “neutral” prime minister, according to media reports.

“There are two theories of why the military declared martial law. The first theory is that groups outside Bangkok were gathering to come into the city and commit violent acts, and the second theory is that the military responded because the interim PM [prime minister] refused to step down last week,” a Bangkok-based petrochemical industry analyst said.

“This is not going to help to resolve the political crisis,” he added.

It may be too early to determine the impact on the domestic petrochemical industry, which has largely been insulated from the political unrest.

“For petrochemicals, business will continue as usual, but in terms of share prices, there might a hiccup because of a weakening of the baht. But, obviously, the longer that this goes on, the more local demand will be negatively affected,”  the analyst said.

Thailand’s petrochemical hub of Map Ta Phut is about 200 kilometres away from the capital and thus, unaffected by the protests that  have been concentrated in Bangkok. 

“There is no impact. Everything is the same. Production is normal,” said a source from a sorbitol producer. Its 3,000 tonne/month plant located at the border of Bangkok is running at full capacity.

The impact is more on sentiment, according to a source in the linear alkyl benzene (LAB) market.

“Everything is normal at this stage on the streets, but I think it [political unrest] is impacting people’s minds and thus buying sentiment. Buying sentiment is depressed,” he said.

The ongoing political crisis has been taking its toll on the Thai economy, which registered a 0.6% annual contraction in the first quarter of 2014, and a steeper 2.1% decline quarter on quarter. If unabated, the political crisis could push the economy into recession.

Additional reporting by John Richardson, Fahima Khail and Felicia Loo

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