Sept. 20 (Bloomberg) -- Thai King Bhumibol Adulyadej confirmed Thailand's military coup leader Sondhi Boonyarataklin as the head of a new interim government after the armed forces ousted Prime Minister Thaksin Shinawatra last night.

The king in a royal order confirmed Sondhi as leader of the Thai Political Reform Council, the armed forces group that ousted Thaksin, according to a statement read by an anchor on the Army- controlled Channel 5.

The world's longest-serving monarch has kept the veneration of the Thais through 18 military coups in his 60-year reign. Sondhi was granted an audience with the king after the coup.

``The prime minister is the jockey, but the horse is owned by the king,'' said Craig Scholl, senior portfolio manager at State Street Global Advisors in Boston, who manages more than $40 billion, including Thai shares.

The Thai Political Reform Council said it now controls the Southeast Asian nation of 65 million people. The council declared its allegiance to the king who is the world's longest reigning monarch.

The military had to ``take control and rectify this situation to enable the country to quickly return to normal and to restore solidarity among the people,'' Sondhi, who is army chief, said in a live television broadcast today.

The coup took place as Thaksin, 57, was in New York preparing to address the United Nations General Assembly. He had faced mounting calls for his resignation since January, when his family sold a stake in its telecommunications business for $1.9 billion without paying taxes, fanning concern about corruption among the urban middle classes.

Canceled Speech

As the coup unfolded, Thaksin canceled his speech at the UN. After staying in his New York hotel overnight, Thaksin left the the city's JFK Airport at 5:35 a.m. local time today and is due in London soon, the U.K. Foreign Office said. The Thai Embassy in London, which said it hadn't any knowledge of his plans, said Thaksin's daughter is studying in London, where the ousted prime minister has a home.

Thaksin, who is popular in rural areas for easing farmers' debts, has headed a caretaker government since he dissolved Parliament in February.

Thai military leaders may appoint a non-military prime minister and draft a new constitution in two weeks, and may hold general elections in October 2007, Agence France-Presse reported, citing Sondhi. He said the decision to mount a coup was taken in the last two days, AFP said.

No action will be taken against Thaksin or his family, Sondhi was quoted by military-run television as telling diplomats. ``All of them still have full rights as normal Thai citizens,'' he said.

Bomb Plot

Thai police on Aug. 24 defused a bomb that they said was intended to kill Thaksin in a car abandoned near the premier's house. At least five military officials were arrested over the alleged plot. Officers denied involvement in the incident.

``We hope that the reform council will promptly implement its pledge to return power to the people and to reform politics,'' Abhisit Vejjajiva, leader of the Democrat Party, the largest opposition group in the parliament that was dissolved in February, told reporters in Bangkok today.

Sondhi, 59, gave his address flanked by the other military leaders, including Supreme Commander Ruangroj Mahasaranon, Royal Thai Navy Chief Sathiraphan Keyanont, and Royal Thai Air Force Chief Chalit Pukbhasuk and the country's police chief. His comments were broadcast on all Thai television stations.

Political Gatherings

Political gatherings of five or more people and the stockpiling of goods is banned, the leaders said in statements broadcast on Thai television.

Thailand's stock exchange, banks, government offices and schools will open tomorrow after being required to be closed today, military leaders said in their statement. Thai bonds in Bangkok were also suspended today, according to the Thai Bond Market Association.

U.S. Treasury Secretary Henry Paulson said the effect of Thailand's military coup on capital markets in that country has been muted and is unlikely to spread to other nations.

Military leaders took the view that rule by the caretaker government ``created extreme divisions in the Thai society as never seen before,'' Sondhi said. The government ``was widely tainted with corruption'' and benefited cronies.

Sondhi's Accusations

Sondhi accused Thaksin's government of going against the 78- year-old king. The reform council late yesterday pledged allegiance to the king and met with him at midnight to inform the monarch of its actions. Soldiers adorned machine guns and tanks with yellow ribbons, a symbolic color of the monarch.

``People should not be scared,'' said Lieutenant Viruch, 48, a soldier from the Royal Guard First Division in Bangkok, who wouldn't give his second name. ``We won't be here long. We come to make the country better and restore democracy. I am very happy because people here are friendly,'' he said, waving a pink rose and a water bottle given to him by passersby.

The coup leaders broadcast that they have suspended the constitution and dissolved the Cabinet, Senate and the constitutional court. In most ministries, permanent secretaries will take over temporarily, they said.

The Thai baht dropped 1.2 percent, the most since May 15. Standard & Poor's warned it might lower Thailand's eighth-ranking BBB+ debt rating, reflecting ``the possibility of sustained deterioration in Thailand's political situation.''

Before last night's coup, the Thai military had engineered 17 coups since the country changed to a constitutional monarchy in 1932.

Thai Coups

``Thailand has had coups for a long, long time so we're pretty used to it,'' said Mechai Viravaidya, chairman of Lam Soon Thailand and a former Thai senator. ``We believe that politics should return to normal fairly quickly because they (the coup's leaders) clearly stipulated that we need some good, solid, quick political reforms and then return to democracy.''

Coup leaders want to return ``power to the people'' and don't seek power for themselves, the military said earlier.

Thailand has had a caretaker government unable to enact new policies since Thaksin dissolved parliament. He called for an April vote in an attempt to end street protests in Bangkok and silence critics. The snap election was boycotted by the country's three biggest opposition parties and later annulled by a court.

New Elections

New elections had been planned in November. Thaksin had pledged to lead his Thai Rak Thai party through the vote and insisted he hadn't decided whether he would return as premier should his party win.

The Thai army has been trying to control insurgents in three mainly Muslim southern provinces fighting to establish an independent Islamic state. More than 1,200 civilians and government officials have been killed in attacks in the region since January 2004. About 90 percent of Thailand's population is Buddhist. Sondhi is a Muslim.

The political uncertainty has taken a toll on Thailand's $188 billion economy, the second-largest in Southeast Asia after Indonesia. The Asian Development Bank this month cut its forecast for Thailand's growth this year to 4.2 percent from 4.7 percent, citing political turmoil.

``One positive thing is that the political situation will be better from now on so our business can move on without worrying about daily protests,'' said Wichian Sri-ong, 43, a fruit vendor at a market near government house.

Thaksin was first elected premier in 2001 after founding Thai Rak Thai, or Thais Love Thais, and was returned with a record majority in February 2005. The self-described ``CEO prime minister'' won favor with Thailand's rural voters after declaring a moratorium on debt owed by many farmers and giving money to every village.

To contact the reporters on this story: Beth Jinks in Bangkok at bjinks1@bloomberg.net; To contact the reporter on this story: Lee J. Miller in Bangkok at lmiller@bloomberg.net.

Last Updated: September 20, 2006 11:58 EDT