RPT-SCENARIOS-How will the judges rule on Thaksin's billions?

(Repeat of story from Feb 22 with no change to text)

By Ambika Ahuja

BANGKOK Feb 22 (Reuters) - Political tensions are building in Thailand ahead of Friday's verdict from the Supreme Court on whether to confiscate $2.3 billion of former premier Thaksin Shinawatra's family assets.

Prosecutors say Thaksin abused his power by changing government policy during his five years in office to enrich Shin Corporation SHIN.BK, a telecommunications business then owned by his family.

A verdict unfavourable to Thaksin could widen political divisions in Thailand and enrage the anti-government "red shirt" movement allied with the ex-premier as it prepares for a prolonged mass protest to demand new elections.

Below are possible scenarios and their likely impact on financial markets in the short and medium term. Analysts say it is unlikely that any of the outcomes will resolve the protracted crisis, going into its fifth year.

For a related analysis click [ID:SGE61I095], and for a factbox with full details of the case click [ID:nSGE61H076]

* COURT SEIZES ALL 76.6 BILLION BAHT

Anti-graft bodies and public prosecutors have recommended the confiscation of the entire amount which the family received from selling shares in Shin Corp to Singapore's Temasek Holdings TEM.UL in early 2006. This is one of two likely outcomes.

It would infuriate Thaksin's supporters, reinforcing their view that an "unelected elite" has influenced the judiciary and is interfering in Thai politics.

They would intensify their campaign to oust a government they believe is illegitimate and propped up by the military that ousted Thaksin in 2006. Prolonged protests could paralyse the government and raise the possibility of violence.

Though partially priced in, this scenario is least favourable for markets. Because of a long weekend holiday, market reaction to the verdict is likely to be delayed until Tuesday, when selling is likely if violence has erupted or seems probable.

But markets have had plenty of time to factor in Thailand's higher risk level, and foreign investor participation in the local foreign exchange, bond and stock markets is fairly low, meaning the size of any sell-off next week may be limited -- just as it was during previous flashpoints in 2008 and 2009.

"In the Thai bond and swap markets, local liquidity conditions are still the dominant factor, and the political situation is unlikely to have much impact in the near term," Standard Chartered said in a research note on Monday.

"The risk is that if political tensions do lead to further physical confrontation, the rates market will need to scale back its expectation of pre-emptive rate hikes by the Bank of Thailand."

Unrest could increase the cost of insuring Thai debt due to perceived political risks in Southeast Asia's second-biggest economy. Five-year credit default swap spreads THGV5YUSAC=R hit a nine-month high of 135.18 basis points earlier this month but have since moved lower and were quoted at 114 on Monday.

* COURT RULES TO SEIZE PART OF THE ASSETS

The court may seize only a portion of the assets and return the rest to the Shinawatra family. It may, for example, decide Thaksin concealed assets and abused his power, but return the wealth his family owned before he took office.

This decision may appear to be a compromise solution that could take the steam out of any subsequent protests, especially if the court's arguments are palatable to moderates.

Financial markets would respond favourably but cautiously in the short term. A measured verdict could undermine claims of "double standards" by the judiciary, weaken Thaksin's immediate reaction and appease anti-Thaksin forces, reducing the risk of violence or political paralysis.

However, this scenario may increase long-term uncertainties. Some analysts say a partial "victory" could empower Thaksin and encourage him to organise and mobilise supporters, both on the streets and in parliament. In a country where money politics prevails, disgruntled government coalition partners might start to review their political allegiance.

* COURT RETURNS ALL ASSETS TO SHINAWATRA FAMILY

The court could acquit Thaksin of concealing assets, saying that he and his ex-wife had legally transferred their stakes in Shin Corp to the children and relatives before entering politics.

Although extremely unlikely, this outcome would be positive for markets in the short term. It would probably slow the momentum of the pro-Thaksin movement, undermining its claim that he is a victim of political persecution.

But stability might be short-lived as it would give weight to Thaksin's claim of innocence and undermine the army's justification for toppling him -- corruption and abuse of power.

Rival "yellow shirt" demonstrators might return to the streets, as would Thaksin's supporters clamouring for his political return and arguing he had been vindicated.

This scenario would do little to heal the rifts in Thailand and would add to long-term uncertainty.

* COURT POSTPONES VERDICT DUE TO THREAT OF VIOLENCE

If unrest breaks out outside the court or in other key areas ahead of the verdict, either caused by "red shirts" or outside agitators, troops will probably be deployed to quell the violence and the court may postpone the verdict.

Any violence and the failure of the country's highest court to read its verdict would cause markets to fall, unnerving investors due to increased uncertainty. If the violence spirals, there is a possibility of parliamentary dissolution and new elections, which would not be positive for markets due to the prospect of an intensification of the crisis.

However, if security forces restore order without casualties, the government would score points while Thaksin and the "red shirts" would be discredited, and the movement would find it difficult to regroup under the same leadership. This could lead to a period of relative calm. (Editing by Martin Petty and Andrew Marshall)