(Updates to midday, adds baht and bond markets)
BANGKOK May 23 Thai stocks fell to their lowest in nearly two weeks on Friday, a day after the army chief seized control of the government in a bloodless coup to restore order following months of turmoil.
The coup late on Thursday came two days after the army declared martial law, spurring a new round of foreign selling in Thailand's stock market this week.
Shares of large cap stocks , among core holdings of foreign investors, and tourism-related shares came under heavy selling pressure on caution over the political outlook.
"We believe that military intervention may prevent outright violence in the near term. The long-term impact depends on the policy and political process afterwards, which is not yet clear," said Kritapas Siripassorn, Citi Research analyst.
The benchmark SET index was down 1.48 percent at 1,384.46 by midday. It earlier fell as much as 2 percent to 1,375.41, the lowest since May 12.
Shares of hotelier Minor International Pcl, Central Plaza Hotel and Airports of Thailand were among top percentage losers.
The Thai stock market posted a net foreign outflow of 20.9 billion baht ($645.16 million) so far this year to Thursday after a net outflow of 194 billion baht ($5.99 billion) last year, according to Thomson Reuters data
Thai stocks have risen 6.6 percent so far this year, underperforming its Southeast Asian peers, including Indonesia's 16.4 percent gain and the Philippines' 15.4 percent, Thomson Reuters data showed.
Some investors appear to be staying calm and seeing a near-term buying opportunity. UBS said the market would look compelling below 1,350, maintaining a year-end target at 1,500.
"Unlike 2006, today's move looks well planned and executed ... We therefore assume that the personnel that would constitute an interim technocrat government, the group of 'neutral wise men', has already been put together and could be put in place very quickly," it said.
General Prayuth launched his coup after the various factions refused to give ground in a struggle for power between the royalist establishment and a populist government that had raised fears of serious violence and damaged Thailand's economy.
Thailand's economy, Southeast Asia's second-largest, shrank 2.1 percent in the first quarter from the previous three months as domestic activity has been depressed by the political unrest and exports remain weak..
The Thai baht edged up on Friday, a day after the army seized power. The baht gained 0.1 percent to 32.54 per dollar as of 0450 GMT.
The central bank was not spotted intervening to support the currency in morning trade, as it did earlier in the week, though traders remained wary of that possibility.
Thai bonds gained support from domestic-led buying, dealers said.
Bid yields on five-year bonds were down 7 basis points (bps) at 3.03 percent after rising 10 basis points on Thursday, and 10-year yields were down 5 bps at 3.52 percent after climbing 7 basis points the day before.
The Thai bond market has seen about 52 billion Thai baht ($1.6 billion) of outflows this year, according to the Thai Bond Market Association.
($1 = 32.395 baht) (Reporting by Viparat Jantraprap; Additional reporting by Jong Woo Cheon in SINGAPORE; Editing by Jacqueline Wong)