Thailand, one of Asia’s most promising and fastest-growing markets, has been hit by a wave of violence in recent weeks that threatens to derail an impressive recovery and projections of solid economic growth. The recent scene in Bangkok’s business district sounded not like the home to one of Asia’s financial hubs but of a war-torn third world nation. “Across the street from Thailand’s main financial district, anti-government protesters gathered sharpened bamboo poles while a speaker dressed in black threatened to castrate soldiers deployed nearby if they moved to disperse their protest site,” writes Shawn Crispin.
The already volatile situation took a turn for the worse on Thursday, when a series of grenade attacks in Bangkok’s central business district injured at least 70 people and killed at least one. The attacks marked a significant escalation in tensions between the armed forces and anti-government protesters. In recent weeks grenades have been fired at government buildings several times by protesters demanding that Prime Minister Abhisit Vejjajiva call new elections. “But this is the first time the attacks have killed or caused widespread injury, and it is the first time grenades have been fired at targets in densely populated business areas crowded with commuters,” writes James Hookway.
The government blamed the violence on factions of the Red Shirt protesters, a group supporting fugitive former premier Thaksin Shinawatra, who was ousted in a military coup four years ago. Named after their red attire, the group has refused to compromise in its demand that the current government call new elections. The Red Shirts have clashed several times in recent weeks with the government supporters near Silom Road, Thailand’s equivalent to Wall Street.
Thailand ETF In Freefall
The deteriorating conditions in Bangkok have begun to take a toll on the iShares Thailand Index Fund (THD), which measures the performance of the Thai equity market. Since the Red Shirts moved their protests to Bangkok’s main shopping district earlier this month, the country’s tourism industry has collapsed. Several high-end hotels and shopping malls have closed down, and dozens of foreign governments have advised their citizens to avoid travel to Bangkok. Even the city’s recession-resistant sex industry has ground to a halt. “It seems even the randiest of tourists can be dissuaded by coils of barbed wire and the sight of army Humvees parked in front of clubs with names such as Lucifer and Spanky’s,” writes Mark MacKinnon.
THD has lost about 4% on this month, at one point sliding more than 8% in just over a week. While the tourism industry has already taken a big hit, some analysts worry that a prolonged conflict could doom a still fragile recovery. Thailand’s economy began to grow in late 2009 after plunging during the recent economic downturn. Each episode of violence increases the likelihood of a double dip into
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Disclosure: No positions at time of writing.