Thailand’s Wait for a Premier Gets Longer, Rattling Markets

Thailand’s parliament canceled plans to elect a prime minister on Friday and said a new date would be set when there is more clarity on a legal challenge, stoking concerns of a prolonged political stalemate and triggering a slump in stocks and the currency.

(Bloomberg) — Thailand’s parliament canceled plans to elect a prime minister on Friday and said a new date would be set when there is more clarity on a legal challenge, stoking concerns of a prolonged political stalemate and triggering a slump in stocks and the currency.

A revised schedule for the premier vote may be set after the Constitutional Court decides on Aug. 16 the plea to review the denial of pro-democracy leader Pita Limjaroenrat’s renomination, House Speaker Wan Muhamad Noor Matha told reporters in Bangkok on Thursday. 

His comments came after the court said it needed more time to decide whether to look into the legality of a parliament vote last month that barred Pita from running a second time for prime minister after his first attempt was thwarted by conservative lawmakers and senators.

At the same time, Pheu Thai — the party linked to former premier Thaksin Shinawatra — also scrapped a plan to unveil a new alliance minus Move Forward on Thursday, fueling concerns that it’s also struggling to muster enough support from conservative parties and the military-appointed Senate that previously blocked Pita. 

Pheu Thai’s new coalition will include some parties from Pita’s now disbanded pro-democracy bloc, as well as some conservative groups in the outgoing government, deputy leader Phumtham Wechayachai told reporters Thursday. More details will be unveiled closer to the prime minister vote, he said.

The latest developments signaled at least a few more weeks of uncertainty around Thailand’s government formation, which has gripped the country since the May 14 general election, putting investors on the edge. Stocks tumbled 1.4%, the biggest decline in four months, while the baht declined over 1%, the biggest loser among major Asian currencies. The yield on benchmark 10-year government bonds rose for a third day to the highest since June 20.

Pheu Thai is set to nominate property tycoon Srettha Thavisin as its prime minister candidate in the next vote. In the meantime, it will have more time to canvass support among the conservative groups. Srettha will need the support of the majority of 750 lawmakers in the joint National Assembly, which combines the elected lower house and the Senate that’s stacked with allies of the pro-military royalist establishment.

Srettha’s success depends on the 250-member Senate, which blocked Pita from the top office due to Move Forward’s reformist platforms, including a campaign pledge to amend the country’s royal insult law, also known as Article 112 of the criminal code, which comes with harsh jail terms. 

Should conservative parties such as Bhumjaithai and Palang Pracharath join hands with Pheu Thai, they would boost support for Srettha to just a slim majority in the 500-member House of Representatives. It’s still to be seen if Srettha will get the Senate’s approval now that Move Forward is out of the picture.

“The delay in formation of the new government is an overhang for the market,” said Narongdach Juntarapaisarn, an analyst at Aira Securities Pcl. “This will further delay budget approval and economic stimulus. Foreign investors’ confidence will also be hurt by this prolonged political deadlock.”

Foreign funds remain net sellers of about $3.5 billion of Thai stocks this year. 

Pheu Thai’s efforts to form a government — nine years after a previous administration led by it was toppled in a coup — comes amid Thaksin’s plan to return home from 15 years of self-exile, adding a new layer of complication around his safe passage. The party has two other prime minister candidates in reserve: Thaksin’s youngest daughter, Paetongtarn Shinawatra, and former attorney-general Chaikasem Nitisiri. 

Yuttaporn Issarachai, a political scientist at Sukhothai Thammathirat Open University, said this would be Pheu Thai’s last chance to lead a government as it is losing its support base to the more progressive Move Forward. “Pheu Thai no longer has a monopoly on the pro-democracy ballots,” he said.

Move Forward won the most seats in the May election after sweeping Bangkok, a traditional battleground between Pheu Thai and conservative rivals, and about 39% of the popular vote. Pheu Thai will now have to contend with protests from Move Forward followers, and even from its own supporters, if it ties up with any of the military-backed parties. 

Srettha and Paetongtarn had earlier vowed not to ally with groups backed by outgoing premier Prayuth Chan-Ocha and Prawit Wongsuwan, who took power in the 2014 coup that ousted the government headed by Thaksin’s sister Yingluck Shinawatra. 

Even if a prime minister is endorsed by the parliament, political turmoil may still remain, according to Tim Leelahaphan, a Bangkok-based economist at Standard Chartered Bank Plc. “It may take a couple of months for the political noise to gradually decline,” he said.

–With assistance from Anuchit Nguyen, Niluksi Koswanage and Clarissa Batino.

(Recasts with markets reaction, adds Pheu Thai canceling announcement of its coalition.)

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