By Pracha Hariraksapitak and Kitiphong Thaicharoen
BANGKOK (Reuters) - Hundreds of anti-government protesters briefly stormed the grounds of Thailand's parliament on Wednesday after breaching a police cordon, ramping up pressure in a four-week street rally seeking snap elections.
The red-shirted supporters of ousted premier Thaksin Shinawatra later retreated to two areas held in their mass rally, including the capital's main shopping district where Bangkok's biggest department stores have stayed shut since Saturday. Tens of thousands of "red shirts" have occupied Bangkok's Rachaprasong intersection since Saturday, rejecting demands by the government to leave.
The scene outside parliament was among the most chaotic and confrontational since the sporadic protests began on March 12.
Protesters massing outside gates of the sprawling complex pressed up against a line of police clad in full riot gear. When some "red shirts" began climbing over an iron fence, the police retreated, and hundreds swarmed onto the grounds.
They approached the lobby doors but left after about 20 minutes to gather again outside the gates, brandishing guns and tear-gas canisters they said were seized from police.
Ministers had held a cabinet meeting inside the building earlier but had left before the protesters broke through. Thai media said Deputy Prime Minister Suthep Thaugsuban was flown out on a helicopter, but this could not be immediately confirmed.
"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 Vietnam.
INTERNAL SECURITY ACT EXTENDED
The government extended a tough Internal Security Act that allows troops to impose order, but there was 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."
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 1.3 percent at the midsession break, just after the incident at parliament.
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 "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.
(Additional reporting by Martin Petty. Writing by Jason Szep. Editing by Alan Raybould)
