Sticky goings-on in Teflon Thailand
Financial markets tend to shrug off periodic eruptions in continuing and apparently intractable Thai political conflict. Will this time be different?
There are lots of examples of the Teflon-like ability of financial markets to shrug off worrying political and economic developments. The most conspicuous one right now is Thailand.
A debilitating six-month-long political crisis, which has taken its toll on Southeast Asia's second-largest economy and severely undermined the country's democratic credentials, has entered a more dangerous phase following last week's highly controversial ouster of prime minister Yingluck Shinawatra by Thailand's constitutional court.
A potentially violent showdown looms, between anti-government protesters who are now seeking to topple Yingluck's caretaker successor - Niwatthamrong Boonsongphaisan, her former deputy - and government supporters who accuse the judiciary of staging a coup d'état.
Yet while the whiff of civil war in Thailand is in the air, investors are taking the political crisis in their stride.
The Thai baht is now trading at the same level against the US dollar as it did at the beginning of this year - and has remained in a tight range of 32 to 33 to the dollar since the start of the crisis.
Yet while the whiff of civil war in Thailand is in the air, investors are taking the [crisis in stride]
Indeed, the US Federal Reserve's decision in May last year to begin scaling back, or "tapering", its asset purchases proved far more damaging to the baht than Thailand's own political conflict.
What's more, the yield on Thailand's benchmark 10-year local currency debt has fallen from 4.2 per cent, just before the eruption of the crisis in late November, to 3.5 per cent. This compares with 4 per cent in Malaysia, 8 per cent in Indonesia and 8.8 per cent in India.