BANGKOK Feb 4 (Reuters) - Supporters of toppled Thai premier Thaksin Shinawatra held small, symbolic rallies at military bases nationwide on Thursday in what analysts see as a prelude to a bigger showdown with Thailand's fragile ruling coalition.
Hundreds of the fugitive billionaire's red-shirted supporters gathered outside army barracks in at least 10 provinces and in Bangkok, calling on soldiers to join their movement and saying they wanted to pre-empt another military coup.
While small, the protests illustrate the widening scope of Thailand's anti-government protest movement and the resilience of Thaksin, who was ousted in a 2006 coup and now lives in self-imposed exile to avoid jail on a corruption conviction.
They are also a reminder of Prime Minister Abhisit Vejjajiva's failure to overcome Thailand's deep political divisions -- and of the potential for further instability ahead of a Feb. 26 Supreme Court verdict on whether to confiscate $2.3 billion of Thaksin's family's assets.
That verdict is widely seen as a potential catalyst for mass street demonstrations this month, keeping investors in Southeast Asia's second-biggest economy on edge in fear of a reprise of violent street riots last April.
As a sign of the unease, the cost of insuring Thailand's sovereign debt has risen in recent days with 5-year sovereign credit default swaps THGV5YUSAC=R approaching a three-month high, trading at a spread of 114.00 basis points compared with 111.50 basis points on Tuesday.
"It may turn out to be a long and painful process," said Pichai Lertsupongkit, head of sales at Thanachart Securities in Bangkok. "Even if nothing big happens after the verdict, there will still be pressure as long as divisions cannot be settled."
"There is no clear sign of how things will play out, who will prevail and what it would take to bring back normalcy," he said.
At a military base in northern Chiang Mai, Thaksin's home province, protesters handed red roses to troops in an attempt to show they have the backing of rank and file soldiers.
"We are here to show support for the soldiers who are with us and condemn those who are with the undemocratic elite," said Surachai Saedan, a regional leader of the United Front for Democracy Against Dictatorship (UDD).
The UDD says it is fighting against political meddling by influential royalists, businessmen, aristocrats and middle-classes -- ardent opponents of Thaksin often referred to as "yellows" in the country's polarising, colour-coded conflict.
The UDD has held minor rallies almost daily in recent weeks, with the judiciary, independent bodies, the military and royal advisers among the targets of their ire.
"It's psychological warfare," said Thai academic Charnvit Kasetsiri. "The reds have put their concerns on the public agenda through these small protests."
The UDD has leapt on rumours -- which they are accused of starting -- of an imminent military coup as talk of splits in the much-politicised armed forces are met by all-too predictable displays of solidarity in battalions across the country. (For an analysis on Thailand's military: [ID:nSGE60E081] and scenarios in the weeks ahead [ID:nSGE61004V])
But with coup rumours abounding, continuing protests and the threat of unrest, securities analysts say the stock market .SETI will remain jittery.
"The key issue plaguing the Thai stock market is political uncertainty, which has pushed investors away," said Chaiyaporn Nompitakcharoen, head of research at Bualuang Securities
"Foreign investors have put less weight on Thai stocks for a while ... and are awaiting more clarity on the political side." (Additional Reporting by Viparat Jantraprap and Panumet Tanraksa in Chiang Mai; Editing by Jason Szep and Martin Petty)