(Reuters) - Thai anti-government protesters marched in Bangkok on Monday, carrying coffins to symbolize those killed at the weekend as the violence hit shares and prompted Southeast Asia's biggest bank to say "bets are off" in Thailand.
The protesters stuck to demands that Prime Minister Abhisit Vejjajiva dissolve parliament to allow fresh elections and leave the country.
Until the declaration of a state of emergency last week, Thailand along with the rest of Southeast Asia had seen a surge in foreign investment inflows, with $1.8 billion coming into Southeast Asia's second largest economy from February 22 to March 7.
"Till a week ago we were very bullish on Thailand," Piyush Gupta, Chief Executive Officer of DBS, Southeast Asia's largest bank, said in Singapore. "After the weekend, bets are off".
Abhisit himself offered few clues as to how he would resolve the five-year crisis that has pitted Thailand's rural poor, many of whom support ex-premier Thaksin Shinawatra who was ousted in a coup in 2006, against the metropolitan elite.
The mood among the thousands of protesters, circling the city on trucks, scooters and "tuk-tuk" taxis, remained defiant and they held on to their bases in Bangkok, one an upscale area where big malls have had to shut.
"We will continue to rally until Abhisit is no longer prime minister," Jatuporn Prompan, a red shirt leader, told reporters.
Abhisit in a televised news conference termed some of the protesters "terrorists, using their innocent fellow citizens who came to call for democracy, to incite unrest to bring a significant change in the country".
Thailand's military has said it will not seek to confront the demonstrators again, although no official truce between the two sides has been declared.
EARLIER ELECTIONS?
The Bangkok Post daily, citing unnamed sources, said Abhisit could dissolve parliament in six months, three months sooner than his most recent proposal. He has in any case to call an election by end-2011.
Thailand's military is averse to allowing Thaksin's supporters back into power, but many in the ranks who come from the same poor groups as the red shirts sympathize with them.
"My understanding is it (the protest) will end with the house (parliament) dissolution, though some may have proposed a national government. The best way is to have them discussed and agreed for the sake of peace," outgoing Thai army chief Anupong Paochinda told a news conference.
Saturday's fighting, some of it in well-known Bangkok tourist areas, ended after security forces pulled back late in the night. The capital has been calm since then, while authorities ponder whether to renew a potentially bloody crackdown on the month-long protests or make some concession to demands for immediate polls.
Thailand's monarchy, which has intervened in past crises, has so far been silent. King Bhumibol Adulyadej, 82, has been in hospital since September.
Political analysts said the impasse could continue even if new elections were held.
"It is at a point of no return, unless the government dissolves parliament," said Charnvit Kasertsiri, a prominent political historian and former rector of Thammasat University. "That could cool things off for a bit but even that won't mend the rift and fix the fundamental problem of power sharing".
AN END TO MARKET'S FEEDING FRENZY?
Bond yields fell as investors bet a central bank interest rate rise would be delayed if political events derailed the economic recovery.
"We believe that damage from the political turmoil over the weekend is significant enough to make the monetary policy committee hold its breath for the policy hike," said Thammarat Kittisiripat, an economist at Tisco Securities, who now expects a quarter point interest rate increase in June rather than April.
Risk aversion sent Thailand's five-year credit default swaps (CDS), which insure against debt default, 5 basis points higher to 105/111 basis points, the most since March 3.
The stock market was down 4 percent and has now shed the bulk of its gains since the start of the year.
Prapas Tonpibulsak, chief investment officer of Ayudhya Fund Management, expected stocks to fall up to 10 percent in the near term.
"It's going to hurt stock market sentiment for sure because the scale of the clashes is beyond expectations. Tourism and related businesses will be the first to be hit," he said.
Shares in national carrier Thai Airways fell nearly 14 percent and Airports of Thailand, the main airport operator, was down 4.73 percent.
Tourism -- which accounts for 6 percent of the economy and directly employs 1.8 million people -- is already suffering, especially after the scenes of heavy fighting in Khao San Road, a magnet for low-budget travelers in the old town.
More than 100 charter flights had been booked to bring in Chinese tourists for Songkran, the Thai New Year holiday which runs from April 13 to 15. Around 70 had been canceled before the weekend and all have now been scrapped.
Vincent Ho, associate director of Fitch's Asia Sovereign ratings, said Thailand's fiscal position had deteriorated since the start of the global economic recession and could worsen.
A sharp drop in tourism revenues would add to fiscal pressures at time when the government is expected to maintain spending, particularly elections are called.
Additional reporting by Vithoon Amorn and Viparat Jantraprap in Bangkok and Umesh Desai in Hong Kong; Writing by David Chance and Alan Raybould; Editing by Nick Macfie
Reuters
