After three days of peaceful demonstrations, fears of violence resurfaced when three grenades exploded at an army base in central Bangkok, wounding two soldiers, reinforcing concerns over Thailand's long-term investment outlook.
The attack failed to deter foreign investors, who bought $40 million of Thai stocks on Monday. Thailand's stock market, which leapt 63 percent last year, remained in positive territory, while the baht currency hardly moved.
Despite the increase in tension, foreign funds have been flowing into Thailand's stock market — to the tune of $852 million over the past three weeks — as investors seek to benefit from a swift rebound in Southeast Asia's emerging economies.
Investors are looking beyond the turbulence at a trio of factors: Thai assets are already trading at a substantial risk discount, the economy has rebounded well despite bouts of unrest and Abhisit is widely expected to survive the protests.
It was also unclear whether the attack was linked to demonstrations by ousted Premier Thaksin Shinawatra's red-shirted supporters, who rallied outside a separate military barracks that has doubled as a command center for Abhisit.
It came shortly after Abhisit rejected demands by protesters to dissolve Parliament and call fresh elections.
Abhisit, backed by the powerful military and establishment elite, made a live television appearance flanked by members of his shaky coalition, and said the time was not right for a poll, which analysts say Thaksin's allies would likely win.
Hours after he spoke, crowds waving red banners and rattling plastic foot-clappers jammed a major boulevard in their signature red shirts, chanting: "Abhisit, get out. Elite, get out."
Nattawut Saikua, one of the main leaders, said there were no immediate plans to march to other locations after as many as 150,000 "red shirts" rallied on Sunday.
He said blood would be drawn from each protester and poured on the street outside Abhisit's office and his Democrat Party headquarters on Tuesday as a symbolic gesture.
Karn Yuenyong, director of independent think tank Siam Intelligence Unit, said Monday's explosions showed the situation was still precarious and more violence could not be ruled out.
"This kind of an attack showed there is quite bit of uncertainty when there are many players involved working toward different goals," Karn said.
An initial investigation showed the grenades were fired into the army compound by a M-79 grenade launcher from outside the base on Viphavadi-Rangsit Rd. The soldiers were hospitalized with wounds to the arm and abdomen respectively.
The turbulence adds to a prolonged political crisis broadly pitting the military, urban elite and royalists — who wear yellow at protests and back Abhisit — against mainly rural Thaksin supporters who wear red and say they are disenfranchised.
Karn said the government still had the upper hand and was well-placed to ride out the storm. "The protesters have a dilemma: stepping it up could provoke unrest which would also hurt their credibility and legitimacy," he said.
"But not stepping it up means they may begin to lose momentum because logistically, it's hard to keep that many people going for that long without results." Most of the protesters traveled from Thailand's poor, rural provinces, piling into pick-up trucks, cars and even river boats, illustrating Thaksin's influence despite his removal in a 2006 coup, a graft conviction and self-imposed exile.
Thaksin's allies are likely to win the next election, which must called by the end of next year, just as they have won every poll held since 2001. The military and urban elite could seek to thwart that result, possibly with a coup, as in 2006, or a judicial intervention, as in 2008.
Thailand was plagued by political upheaval in 2008, when yellow-shirted protesters who opposed Thaksin's allies in the previous government occupied the prime minister's office for three months and then blockaded Bangkok's international airport until a court ousted the government.
