Thai shares look set to tumble 5 per cent today, following knee-jerk selling when the Stock Exchange of Thailand (SET) resumes trading after Tuesday night's bloodless coup, says JP Morgan Securities (Thailand) president Marco Sucharitakul.

In the offshore currency market yesterday, the baht rebounded to 37.57 to the US dollar in New York from its trough of 37.95 after the coup was reported.

The baht closed at 37.25 in the onshore market on Tuesday. However, that market was prohibited by the central bank yesterday from carrying out transactions.

Marco, however, went some way to soothing market jitters by asserting that the impact would not last long.

Tuesday night's coup was accepted by foreign investors, but they are waiting to see whether the interim government contains ministers who are knowledgeable about the economy.

"Foreign investors are waiting for a clearer picture, but it's possible they'll unload Thai shares beforehand. However, I believe it will be a short-term effect. The faster an interim government is set up, the more foreign investors' confidence will be restored," he said.

Kongkiat Opaswongkarn, CEO of Asia Plus Securities and chairman of the Federation of Thai Capital Organisations, admitted the coup would hurt stock-market sentiment but said its impact would not be serious and that it would be short-lived.

"I think it will have an impact on the stock market, but it will be a short-term effect, because rumours about the coup were spreading ahead of the market's close on Tuesday, so this already factored into share prices somewhat," he said.

He said the SET had an efficient pre-emptive measure - a circuit breaker - which is a market tool to suspend trading in the event the stock market falls 10 per cent.

He added that although ceasing SET operations was a good measure, the market could not be halted for long, because that would erode foreign investors' confidence.

Bank of Thailand governor MR Pridiyathorn Devakula said the 60-satang depreciation in the baht was partly caused by exporters selling dollars. The central bank, however, did not intervene in the foreign-exchange market.

A Bank of Ayudhya trader forecast 37.95 would be the weakest the baht would fall to the dollar, because the situation was already improving.

A Kasikornbank dealer said the direction of the baht would depend on upcoming internal events.

Usara Wilaipich, senior economist at Standard Chartered Bank, said Thai citizens and investors had responded well to the coup, because they believed it to be a change for the better.

"The event will lead to an improvement in the Kingdom's politics, although it will take some time. Moreover, a new prime minister and economic ministers are important factors in restoring investors' confidence in the country's economic policies," she said.

John Teng, head of credit research at Nomura International, said the Thai coup would likely hit the economy in the short term, as confidence and tourism would suffer. He said the long-term impact on credit was harder to assess, because that involved questions of if and when democracy would be restored, what would happen if the ruling party split and if so, the impact this would have on economic policy.

Brokerage CLSA said in a report it would add one percentage point in the Asian relative-return portfolio to make Thailand a double overweight.

Marshall Gittler, chief Asian strategist with Deutsche Bank Private Wealth Management in Singapore, believes the coup will increase the short-term risk on Thai assets. He added that it would also heighten uncertainty, making foreigners less inclined to invest and in turn hurting the equity market.

Rodrigo de Rato, managing director of the International Monetary Fund, said in a statement yesterday he believed Thailand's economy was "fundamentally strong" and that financial-market reactions to the coup had been limited.

Meanwhile, SET president Patareeya Benchapolchai said the market would resume normal trading today.

She said the plunge would not be as sharp as those following the last two coups, in 1991 and 1992, which saw the SET slump about 11 per cent over the four days afterwards. However, it rapidly sprang back to original levels. She added that institutional investors were concerned only about when the stock market would reopen.

Finance reporters

The Nation