* Thai army declares martial law, but says not a coup
* Baht pares losses; intervention suspected
* Benchmark stock index slides 1 percent
* Analysts say 'bad news' priced in
By Jongwoo Cheon and Satawasin Staporncharnchai
SINGAPORE/BANGKOK, May 20 Thai stocks and the baht
currency slid on Tuesday after the army imposed martial law in a
bid to restore stability after months of protests left the
country without a properly functioning government.
But analysts did not expect a significant exodus of foreign
funds unless violence escalates and threatens further damage to
Southeast Asia's second-largest economy.
The army denied that it was staging a military coup and a
caretaker government remained in office.
The baht fell as much as 0.5 percent to 32.62 per
dollar in early trade. It later pared most of those losses and
was quoted at 32.48 as the central bank was suspected of
intervening to support the currency, traders said.
Thailand's main share index lost around 1 percent,
while the five- and 10-year government bond yields
"The near term bias is for further USD/THB strength, with
32.85/95 some initial upside targets to think about," said
Jonathan Cavenagh, senior FX strategist with Westpac in
Singapore, referring to the dollar/baht pair.
The Thai currency is expected to remain an underperformer
against the likes of the Malaysian ringgit and the
Philippine peso, Cavenagh said.
The economy shrank more than expected in the first quarter
as anti-government protests dragged on, adding to concerns the
country is sliding into recession.
The Thai bond market has seen 51.1 billion baht ($1.6
billion) of outflows so far this year, even though foreigners
have bought a combined net 19.6 billion baht in bonds, according
to Thai Bond Market Association.
In the stock market, foreign investors have sold a combined
net 7.5 billion baht so far this year, according to exchange
Yet, the main index is still up more than 7 percent so far
Analysts said some investors may be looking to buy Thai
assets on dips.
Thailand's government bonds have been thriving on gloomy
economic and political headlines as investors line up to buy
"We expect interest rates will remain low, especially as the
strengthening current account insulates THB from external
pressures," Citigroup said in a research note, referring to the
"We continue to advise clients against being short THB. By
minimizing violence, martial law could limit the impact on the
critical tourism sector. The current account improvement may
then outstrip potential capital outflows."
Thailand reported a combined $8.2 billion current account
surplus in the first three months of the year.
Thai assets have already priced in the prolonged political
unrest, analysts said.
Last year, foreigners dumped a net 194.7 billion baht in
Thai stocks and bond market suffered 942.0 billion baht
"Even if the bias is for equities to weaken we could still
see bargain hunters support the market," Westpac's Jonathan
"A fair degree of 'bad news' already priced into the
($1 = 32.45 Baht)
(Editing by Kim Coghill)