Thai "red shirts" to step up Bangkok protest

BANGKOK (Reuters) - Anti-government protesters say they will take their mass rally in Bangkok to another level on Wednesday as pressure mounts on Thailand's prime minister to end a five-day standoff in the city's commercial district.

Red-shirted supporters of ousted former Prime Minister Thaksin Shinawatra said they would target Prime Minister Abhisit Vejjajiva whose military-backed government is under mounting pressure to call elections after nearly four weeks of protests. Tens of thousands of "red shirts" have occupied Bangkok's Rachaprasong intersection since Saturday, rejecting demands by the government to leave an area lined with posh department stores, which have remained shut, and luxury hotels.

"From today, we will target our actions on people, places and activities connected with Mr. Abhisit," protest leader, Nattawut Saikua, said to reporters after telling the crowd they would take the rally "to the next level."

Thai stocks and the baht currency rose on confidence that the government, with its support from military top brass and the royalist establishment, will survive the increasingly bold showdown with the mostly rural and working class protesters.

Despite the gains, Finance Minister Korn Chatikavanij said prolonged protests could inflict damage on the economy, Southeast Asia's second biggest, by causing output this year to be "significantly worse" than a government projection of 4.5 percent growth and possibly delay an expected interest rate rise.

Most economists expect Thailand' benchmark interest rate to rise in June from a record low of 1.25 percent. It would be "intolerable" for the economy if the demonstrations last another month, Korn told Reuters in an interview.

The government extended a tough Internal Security Act that allows troops to impose order, but there is also no sign of an imminent crackdown. The army, which is central in the balance of power, is refusing to use force to disperse the crowd.

Army chief Anupong Paojinda said there was no justification to move in despite pressure from Abhisit to impose the law, an unidentified source told The Bangkok Post newspaper.

"We can't since it will cause losses," the source quoted Anupong as telling Abhisit. "They all are Thais."

MARKETS REMAIN FIRM

Foreign investors have been ploughing money into the fast-recovering economies of Southeast Asia and have not left Thailand out despite the turbulence. Since February 22 foreigners have bought a net $1.73 billion of Thai stocks.

"It's likely to be a volatile session but the big picture is that the market is still in a positive mood. Fund flows into the region were quite good yesterday and oil prices will support energy stocks," broker Philip Securities said in a research note.

Thai stocks, which have risen more than 80 percent over the past 12 months, were up 1.1 percent. The baht firmed about a quarter of a percent in line with Asian peers.

There is concern, however, the crisis could squeeze longer-term foreign direct investment, or FDI, which was has been volatile since a 2006 military coup ousted the twice-elected Thaksin after allegations of corruption and nepotism.

"I've been getting a sense for the first time in the more than three years since the coup that FDI -- including our client base -- is really taking a hard look at Thailand long-term because of this," said Roberto Herrera-Lim, an analyst at Eurasia Group, a consultancy.

"They see that the conflict is much deeper than the elite conflict of the past."

Abhisit is facing pressure from Bangkok's elite and middle class and even his own government to halt the rally, but has held back to avert a confrontation that many believe would cause even greater damage. Threats to arrest the protesters have not been carried out, emboldening the movement.

"The police, the government and myself are still very committed to enforce the law and solve the problem," Abhisit said in a televised address on Tuesday. "We want to see the country being peaceful."

The "red shirts" have taken aim at the urbane, Oxford- and Eton-educated economist, whom they see as a front man for an unelected elite and military that is secretly intervening in politics and operating with impunity.

They say Abhisit, who came to power in a 2008 parliamentary vote after courts dissolved a pro-Thaksin ruling party, should call an election and let the people choose their government. "Red shirt" leaders say they will respect the result.

The protesters risk losing support if shops remain shut and high-end hotels such as the Four Seasons and Hyatt remain blocked, and if traffic remains disrupted, analysts said.

(Editing by Jason Szep & Jan Dahinten)