It has taken three months and a highly controversial political pact that ends almost a decade of military rule. But Thailand finally has a new leader.
The property tycoon Srettha Thavisin has been voted in as prime minister by the Thai parliament. He is the former CEO of the country's largest developer, Sansiri (SET:SIRI), and comes from the populist Pheu Thai party, forever linked with former leader Thaksin Shinawatra. But Srettha, nicknamed Nid, was only approved after Pheu Thai ditched its reform-minded election partners and struck a deal with the generals who seized power in 2014.
I'll explain the complexities in a second. But the bottom line is, investors like it. The Thai stock market, in the form of the SET index, is up 2.6% this week.
The Thai stock market may sustain that progress as it looks to come back into balance after it had the distinction of being Southeast Asia's serial underperformer due to the political instability. Markets now have the certainty they supposedly crave.
The military is also out of power, sort of. What's more, Thaksin has returned to Thailand from exile in Singapore for the first time in 15 years. For now, he was sent to prison, then transferred at 1 a.m. today to a police hospital. There's widespread speculation that the deal with the generals will spare him much of the eight-year sentence he was ordered to serve for corruption; he was convicted in absentia.
Nid was confirmed as the new Thai leader hours after Thaksin's return. While the reformist party Move Forward won the most votes and parliamentary seats in May's nationwide election, its candidate for prime minister, Pita Limjaroenrat, was repeatedly blocked by senators hand-picked by the Thai military.
Move Forward has been left out of Pheu Thai's coalition even though the two parties campaigned as allies. That leaves Move Forward supporters furious, and even many Pheu Thai voters questioning their party's commitment to reform.
The sticking point is that Move Forward pledged to change Thailand's strict laws forbidding criticism of the monarchy. Pheu Thai now says it will make no change to these lèse-majesté strictures known as "Article 112." It also has formed a government with military-backed parties, including the Palang Pracharath party formed by the junta after the 2014 coup, and United Thai Nation, a new party headed by coup leader and outgoing prime minister Prayuth Chan-ocha, also Thailand's former military commander-in-chief.
The catch preventing Pita from taking power is that only the 500-seat Thai House of Representatives is elected by the public. The Senate of Thailand and all its 250 members are appointed by the military. They voted Pita down.
The military ousted Thaksin in a coup in 2006, then ousted his sister Yingluck Shinawatra in another coup in 2014. Now the armed forces, forever tied to the "yellow shirt" supporters of the Thai king, have teamed up with the "red shirt" rural masses who keep electing the Shinawatras band each party their supporters form when previous entities are forced to disband.
So call this an "orange" government. The "red shirts" are mainly working-class voters or farmers from Thailand's north and northeast. The "yellow shirts" are more middle-class and urban. It's sure to be an uneasy alliance.
What investors cheer is that the military has finally surrendered a modicum of power. This government under Nid is the first step along the path back to a democratic Thailand. Pheu Thai has traditionally introduced measures that have been stimulatory for the Thai economy. The military, on the other hand, has been ham-fisted in its attempts to govern, particularly when it comes to pro-business policies. It has been more concerned with preventing any disintegration of the power of the Thai king than setting taxes and drafting regulations.
It is a timid step toward democracy. An opinion poll from the National Institute of Development Administration found that most Thais disagree with the military parties remaining in power, because the combined results of the House of Representative elections delivered a landslide for "red shirt" reform parties. Undoubtedly in the back of people's minds are the demonstrations in 2010, when more than 90 "red shirt" Thaksin supporters were killed as the army cracked down.
Notably, when Thaksin, 74, returned via private jet from Singapore, he wore a yellow lapel pin with a royal insignia. While in the airport terminal, he knelt and bowed to a golden altar before a portrait of the king and queen.
It certainly looks like he has struck a deal with the establishment. The Department of Corrections said he underwent a medical checkup on admission into the prison system that demonstrated heart and lung problems as well as high blood pressure and spinal issues.
This morning, the Thai Royal Police said a prison doctor examined Thaksin and recommended an "urgent transfer" to hospital due to chest tightness, high blood pressure and a low oxygen reading in his fingertips. He was taken to Police Hospital. He is now able to file for a royal pardon as of his first day in jail.
Investors should watch for further progress and any new pro-business policies pumped out by Pheu Thai now it is at the helm. It should watch, too, for the meddling hand of the military, a political force that reformers will hope will now be shunted aside.
