March 26, 2019 / 3:39 AM / a month ago

Breakingviews - Chaotic Thai result is near investors' worst case

Thailand's Prime Minister Prayuth Chan-ocha casts his ballot to vote in the general election at a polling station in Bangkok, Thailand, March 24, 2019. REUTERS/Athit Perawongmetha TPX IMAGES OF THE DAY

SINGAPORE (Reuters Breakingviews) - Thailand’s chaotic electoral result is near investors’ worst case scenario. A vote to end direct military rule has slid into confusion, with accusations of cheating and both main rivals claiming they can form a government. A clear outcome may be weeks away, at best. With foreign funds already selling out of shares, that’s a poor prospect for a cooling $460 billion economy.

Early results for the first election since a 2014 coup, released on Monday, showed the Pheu Thai party, which supports ousted prime minister Thaksin Shinawatra, won 137 seats in the lower house, against 97 for the pro-army party Palang Pracharat, which took a surprising lead in the popular vote.

But it’s far more complicated: there are still 150 seats to be allocated, using a complex formula, and that outcome may not be clear until May. Worse, under a new system devised by the military, a prime minister requires a majority in both houses, including the 250-seat Senate, appointed by the junta.

Either side will require a coalition to rule. Even a government under coup leader Prayuth Chan-ocha, unused to compromise, would face hefty opposition in the lower house from the pro-democracy bloc.

All of this, plus accusations of incompetence against the Electoral Commission and vote-rigging, heralds a period of uncertainty and jostling. Just as unsettling has been the monarchy’s reemergence in politics. Rare and cryptic comments from King Maha Vajiralongkorn are widely seen as support for the junta leaders.

This rapid descent into disarray should worry. Back in 2013 to 2014, according to Capital Economics, unrest took 0.7 percentage points off growth. Tourism is key to the economy, and foreign investment is much-needed to prop up suboptimal growth. Overseas ownership of equities is already at a 20-year low, according to Swiss bank UBS. Since the beginning of this month, the Thai market has seen more than $500 million in net outflows. 

So far, there are no large scale protests on the streets – and markets are holding fairly steady, presumably in the hope of a return to order, even if that is to the ugly status quo ante, or thereabouts. For now, Thailand’s one step closer to really scaring investors. 

Breakingviews

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