By Ambika Ahuja and Ploy Ten Kate
BANGKOK (Reuters) - "Red shirt" protesters in Thailand will consider on Tuesday a proposal by Prime Minister Abhisit Vejjajiva for an election on November 14, aimed at ending a two-month political crisis in which 27 people have been killed.
Share prices opened 3 percent higher in response but prices of government bonds, seen as a safer bet at times of tension and therefore strong in recent weeks, fell.
Abhisit, who is backed by the royalist establishment, rejected an offer last month by the mostly rural and urban poor protesters to end their occupation of Bangkok's main commercial district in return for elections within three months.
Reaction from leaders of the red shirt United Front for Democracy Against Dictatorship (UDD) was cautiously positive.
Asked if an agreement was in sight, Suporn Attawong said: "It would be wonderful to reach an end without more losses."
He said some sort of response would be made on Tuesday, adding he thought UDD Chairman Veera Musikapong would probably seek talks with the government on Abhisit's five-point plan.
The Thai bourse was up 3.25 percent at 0307 GMT whereas the rest of Asia was mixed.
"Market momentum is definitely going to get better and this is primarily driven by the prime minister's televised proposal last night," said Sukit Udomsirikul at Siam City Securities. "Whether this is a game-changing plan, we'll find out."
Five-year bond yields rose 10 basis points in early trade to 3.25 percent as prices fell. Some investors took the view the central bank could raise interest rates if political tension was less of a drag on the economy.
The finance minister said last week the protests could cut growth by 2 percentage points if they continued all year.
CRUCIAL TIMEFRAME
Abhisit had previously offered an election in December, about a year before his term ends, and some analysts doubted whether the slightly earlier date would satisfy the "red shirts," who broadly back former Prime Minister Thaksin Shinawatra.
They say both sides want to be in power in September for two critical events -- a reshuffle of leaders in the military and police force, and the passing of the national budget.
If Thaksin's camp prevails and is governing at the time of the military reshuffle, analysts expect big changes, including the ousting of generals allied with Thailand's royalist elite, a prospect royalists fear could diminish the power of the monarchy.
"The game plan is for the government to make it appear this offer is reasonable. If the red shirts reject it, they'll be seen as the unreasonable party and that will then give the government a chance to go after them," said Roberto Herrera-Lim, an analyst at risk consultancy Eurasia Group.
"It doesn't seem like much of a compromise," he added. "This just shows how crucial the timeframe is and the importance of having that reshuffle of the military and police take place before an election. Judging by the goals of the red shirts, I don't think they'll go along with this."
Abhisit is under intense pressure to end the political stalemate that has choked off tourism, forced posh hotels and malls to close and prompted the International Crisis Group to warn Thailand could slide into an "undeclared civil war."
In a televised statement, Abhisit set five broad conditions for reconciliation that must be agreed before any election.
The monarchy, he said, should not be dragged into politics or "violated" -- a condition that follows government accusations some "red shirts" aim to overthrow the monarchy.
The second condition calls for reforms to address social injustice, the third proposes an independent body to monitor media to ensure unbiased reporting and the fourth a committee to investigate recent political violence.
The fifth point broaches possible political reforms that could include constitutional amendments and a review of a five-year ban on politicians allied with Thaksin.
They were written in language broad enough to appeal across the political spectrum, leaving the date of the new election still as the main sticking point.
"No one is going to disagree with the five conditions. They are just decoration because that's the language you use in any call for national reconciliation. But the point is that this is the first concrete offer from the government," said Chiang Mai University political science professor Thanet Charoenmuang.
"The ball is now in the red shirts' court to see if they want something they can hold on to, get their victory and go home, or keep pushing forward into an uncertain future."
The red shirts say Abhisit lacks a popular mandate after coming to power in a controversial parliamentary vote 17 months ago, heading a coalition cobbled together with military help.
On Tuesday, thousands of protesters remained in the fortified camp in Bangkok's main shopping area. Army spokesman Sansern Kaewkamnerd has said the security forces could use armoured vehicles to disperse them but no move has been made to do that.
(Additional reporting by Panarat Thegumpanat, Jason Szep, Vithoon Amorn and Martin Petty in Bangkok and Saikat Chatterjee in Hong Kong; Writing by Alan Raybould; Editing by Sanjeev Miglani)
