Investors prepare for more instability

23 03 2013

This is not our usual area of interest, yet we felt this story, from the NASDAQ, was worth mentioning as the judicial watch begins again. The story opens withthis:

Shares of the iShares MSCI Thailand Capped Investable Market Index Fund (NYSE: THD ) are off more than three percent Friday and are flirting with their lowest levels in about six weeks on fears the country’s recently approved $68 billion infrastructure spending bill could violate the Thai constitution along with rumors Prime Minister Yingluck Shinawatra could be indicted.

Earlier in the week, the cabinet approved a $68 billion infrastructure plan, “previously hailed as a potential boon to THD because the ETF allocates about 40 percent of its combined weight to sectors that would benefit from improved infrastructure such as energy, telecommunications and utilities.” However, this much needed investment in sagging and lagging infrastructure is being challenged by the opposition.

More worrying for investors,though, is the threat to Prime Minister Yingluck Shinawatra from judicial action, including on Thaksin’s passport and assets declarations:

The current prime minister is also under fire because of discrepancies in paperwork she submitted to the National Anti-Corruption Commission upon becoming prime minister.

At issue is the fact that her husband, Anusorn Amornchat, amassed a position of over 4 million shares in a Thai company called Ad Index before his wife became an obvious candidate for prime minister.

The prime minister said she made a loan to the company in 2006, though records indicate no such loans appear on the company’s books until 2007 .

The report states that the:

loss of Yingluck as prime minister could have near-term consequences for THD, assuming the worst-case scenario plays out. Thailand already has a history of political volatility and THD has shown a penchant for adversely reacting to that volatility.

Additionally, it is worth remembering that many market participants wanted Yingluck to emerge victorious in 2011 because she was viewed as the pro-business candidate.

Undoubtedly, this is a story to watch.


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