By Nopporn Wong-Anan and Sukree Sukplang
BANGKOK (Reuters) - Thai anti-government protest leaders staged a dramatic escape from police on Friday after the authorities vowed to crack down on "terrorists" ahead of a planned televised address by the prime minister.
One protest leader slid down a rope from a balcony, while others were rescued from riot police by hundreds by "red shirts," who heavily outnumbered security forces at a Bangkok hotel owned by the family of former premier Thaksin Shinawatra.
The protest leaders later joined thousands of their supporters at the main "red shirt" site in a central Bangkok shopping centre.
Thailand's financial markets extended losses. Sovereign credit default swap spreads, a measure of the country's credit quality, widened out and the stock market lost further ground, underperforming the emerging Asian region.
The "red shirts" back Thaksin, who was ousted in a 2006 coup, and want Prime Minister Abhisit Vejjajiva to step down immediately and call early elections, which he has refused to do.
Abhisit had been due to hold his first news conference in four days at 1 p.m. local time (7:00 a.m. British time) but it was delayed, although no reason was given.
MARCH CALLED OFF
Protesters called off plans to march on television stations that they accused of biased coverage, removing one potential flashpoint with security forces, and hunkered down in their base in a central Bangkok shopping district.
The government, which had previously said it would not directly confront the protesters, stepped up its rhetoric ahead of the botched arrest of red shirt leaders, although there are no troops on the streets of Bangkok.
"We will arrest and suppress the terrorists. We have set up special task forces hunting for the terrorists," Deputy Prime Minister Suthep Thaugsuban said.
The government warning came after five days of peace in the capital and as the thousands of protesters camped out in Bangkok's most affluent shopping centre, which they vowed to make a "final battleground" with the security forces.
Violent clashes last Saturday killed 24 people and injured more than 800 in Thailand's worst political violence since 1992, and potentially damaging a recovery in Southeast Asia's second-largest economy, especially its lucrative tourist sector.
Finance Minister Korn Chatikavanij told Reuters on Thursday Abhisit would not resign as it would "be very negative for the country.
The government has also said it would crack down on people it believed to be financing the red shirts and issued summonses under emergency powers for 60 people to report to a military barracks, where Abhisit has set up emergency headquarters.
The escalation in government rhetoric on Friday caused a further selloff in Thai markets.
By 0639 GMT, the Bangkok bourse was down 2.1 percent and has lost almost all its gains this year.
Thailand's five-year credit default swaps (CDS), also used to speculate on the country's credit quality, were trading at 110/115.57 against 105/111 bps on Monday, the last trading day prior to a three-day holiday.
OCCUPANCY RATES PLUNGE
The violent protests have hit Thai tourism, with occupancy rates less than a third of normal levels in Bangkok, according to a tour operator body.
According to a report from investment bank Morgan Stanley, losses to tourism, which accounts for 6 percent of gross domestic product, could clip 0.2 percentage point from economic growth this year.
If the protests, centred on Bangkok's ritziest shopping area, are prolonged, damage to consumer confidence in the capital could lop off another 0.6 percentage point, the bank said.
The government believes Thailand's economy could grow 4.5 percent this year, although Korn warned that forecast could prove optimistic.
(Additional reporting by Viparat Jantraprap; Writing by David Chance; Editing by Alan Raybould and Bill Tarrant)
