Yingluck Forms Five-Party Coalition to Widen Mandate After Voting Success

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Photographer: Dario Pignatelli/Bloomberg

Yingluck Shinawatra, leader of the opposition Pheu Thai party, attends a news conference at party headquarters in Bangkok on July 3, 2011.

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Photographer: Dario Pignatelli/Bloomberg

Yingluck Shinawatra, leader of the opposition Pheu Thai party, attends a news conference at party headquarters in Bangkok on July 3, 2011. Close

Yingluck Shinawatra, leader of the opposition Pheu Thai party, attends a news conference at party headquarters in... Read More

Photographer: Dario Pignatelli/Bloomberg

Pheu Thai party supporters celebrate at Pheu Thai headquarters, in Bangkok on July 3, 2011. Close

Pheu Thai party supporters celebrate at Pheu Thai headquarters, in Bangkok on July 3, 2011.

Photographer: Dario Pignatelli/Bloomberg

Pheu Thai party supporters react to the first exit polls at the party's headquarters in Bangkok, Thailand. Close

Pheu Thai party supporters react to the first exit polls at the party's headquarters in Bangkok, Thailand.

Photographer: Dario Pignatelli/Bloomberg

Yingluck Shinawatra, leader of the opposition Pheu Thai party, greets her supporters at her party headquarters in Bangkok, Thailand, on Sunday, July 3, 2011. Close

Yingluck Shinawatra, leader of the opposition Pheu Thai party, greets her supporters at her party headquarters in... Read More

Photographer: Udo Weitz/Bloomberg

A protestor carries a doormat with pictures of former Thai prime minister Thaksin Shinawatra and his wife Potjamarn during a protest in Bangkok in Aug. 29, 2008. Thaksin’s opponents view him as a corrupt billionaire who shifted power away from the traditional elites and poses a threat to King Bhumibol Adulyadej, who ascended the throne in 1946. Close

A protestor carries a doormat with pictures of former Thai prime minister Thaksin Shinawatra and his wife Potjamarn... Read More

Yingluck Shinawatra, set to become Thailand’s first female prime minister, announced the formation of a five-party coalition to broaden the mandate she won in elections and head off concerns that violence might erupt over the fate of her exiled brother, ex-premier Thaksin Shinawatra.

Yingluck called for “unity and reconciliation” at a press conference in Bangkok, where she announced the 299-seat coalition. Thaksin, who was ousted in a 2006 coup, earlier told reporters in Dubai that he had no immediate plans to return.

Yingluck’s clear victory -- her Pheu Thai party won 265 seats in the 500-seat parliament -- may ease concern about political strife after Thaksin’s opponents overturned the last three election results. Key to sustaining a rebound in investor confidence, after the nation’s stocks and currency surged today, will be how Yingluck approaches addressing historical conflicts surrounding her brother.

“This is the next step that needed to be taken to get Thailand on the right track,” said Michael Montesano, visiting research fellow at the Institute of Southeast Asia Studies in Singapore, referring to respecting the results of the election. “There are many steps ahead and the country is bitterly divided.”

The baht rose 1 percent to 30.49 per dollar at 2:52 p.m. in Bangkok, the biggest gain since February 2008. The currency retreated the past two months in the run-up to the election, when global funds were also net sellers of Thai equities.

Baht, Stocks Jump

The benchmark SET Index rose 3.5 percent to 1,077.77 in Bangkok trading, the most since May 2010. Companies linked to Thaksin, including SC Asset Pcl and M Link Asia Corp., surged more than 12 percent. Shin Corp. Pcl, Advanced Info Service Pcl (ADVANC) and Thaicom Pcl, telecommunication companies formerly controlled by Yingluck’s family, also jumped.

“We should see some stability for a while and that should be good for the market,” said Kongkiat Opaswongkarn, chief executive officer of Asia Plus Securities Pcl (ASP), Thailand’s third- biggest brokerage. “This is a landslide victory.”

Prime Minister Abhisit Vejjajiva resigned today as party leader and the defense minister said the army accepted the result. His Democrat party had 159 seats, Election Commission spokesman Paiboon Lekprom said. The commission will certify winning candidates within 30 days, after which Parliament will meet to pick a prime minister.

Red Shirt Blockade

The election marks a repudiation of the country’s ruling elite, which views Thaksin as a threat to the monarchy, and an endorsement of the man at the center of a feud that has divided Thailand for the past decade.

Thaksin supporters, known as Red Shirts, blockaded parts of Bangkok in the past two years to push for an election after smaller parties in 2008 switched sides in a parliamentary vote to give the premiership to Abhisit. The protests last year killed 91 people.

“It’s not as much a vote for Thaksin as a vote against the manipulation, coercion and suppression that we’ve seen since 2006,” said Thitinan Pongsudhirak, director of the Institute for Strategic and International Studies at Chulalongkorn University in Bangkok. His opponents “can’t just take them down like they did last time. If they do, the backlash from Pheu Thai voters will be severe, it will be just cataclysmic this time.”

Defense Minister Prawit Wongsuwan last night reiterated a pre-election pledge by the army that it wouldn’t stage a coup, like it did against Thaksin in 2006. Yingluck said she would “definitely hold discussions with the army” after becoming prime minister.

Military Advice

Prior to yesterday’s vote, army chief Prayuth Chan-ocha had urged voters not to pick the “same thing” in elections, the last four of which have been won by Thaksin loyalists. Speaking after exit polls forecast victory for Pheu Thai, Thaksin told Thai PBS television that if the results weren’t respected then “the country can’t have peace.”

Pheu Thai’s victory may raise the prospect of a return by Thaksin, 61, who fled a 2008 jail sentence for abuse of power and has shaped Pheu Thai’s strategy from exile in Dubai. Thaksin, who founded what became Thailand’s biggest mobile-phone company, remains popular among poorer Thais in the north and northeast of the country who recall his decision to provide them with affordable health care and cheap loans.

Pheu Thai won 153 of 195 seats in the north and northeast yesterday, while the Democrat party won 73 of 86 seats in Bangkok and the south, according to unofficial results from the Election Commission.

‘Too Old’ to Return

Thaksin told reporters in Dubai that he was “too old” to return as prime minister.

“Going back is not a main concern, not a top priority,” he said. “I should be part of the solution, not the problem”

Thaksin’s opponents, located largely in the better-off urban areas, view him as a corrupt billionaire who shifted power away from the traditional elites and poses a threat to King Bhumibol Adulyadej, who ascended the throne in 1946. Abhisit told his supporters before the election that Pheu Thai plans an amnesty for Thaksin that would allow him to return home and reclaim more than $1 billion in seized wealth.

Thaksin’s opponents, who wear yellow shirts as a symbol of their allegiance to the king, blockaded parliament and shut down Bangkok’s airports in 2008, disrupting trade and stranding thousands of tourists. The army refused to disperse them as they pushed for the Thaksin-allied government to resign. Courts have disbanded two parties tied to Thaksin and disqualified two prime ministers allied to him since his ouster.

Minimum Wage

Yingluck, 44, pledged last night to implement the party’s campaign policies, which include almost doubling the minimum wage in some parts of the country to 300 baht ($10) per day, and distributing tablet computers to students.

The “big-ticket spending” may boost the economy while increasing concerns about inflation and fiscal discipline, said Usara Wilaipich, a Bangkok-based economist at Standard Chartered Plc. The Bank of Thailand “is still likely to continue its tightening cycle in the upcoming policy meeting in order to curb inflation expectations, barring any deterioration in the political situation,” she said by phone.

Thai inflation held near a 32-month high in June after food prices increased, the Ministry of Commerce said July 1. The Bank of Thailand last month raised the nation’s benchmark interest rate for the fourth straight time to 3 percent, and signaled further increases may be needed to curb rising prices.

Corporate Veteran

Yingluck, who has one son, earned a master’s degree in public administration in 1990 from Kentucky State University in the U.S. While she has little political experience, having been drafted into the campaign seven weeks before the election, she is a veteran corporate executive in the Shinawatra family’s business group. She has served as president of Advanced Info, Thailand’s largest mobile-phone company, and has run SC Asset, a property developer owned by Thaksin’s children.

In the run-up to the election, Yingluck deflected questions on whether Pheu Thai would orchestrate Thaksin’s return if it won. Last night, she did the same, saying only that there was a “lot of work” to be done to “maintain unity.”

There have been nine coups in Thailand since King Bhumibol ascended the throne in 1946. Twelve of Thailand’s 27 prime ministers since absolute monarchy ended in 1932 have been military leaders.

“You couldn’t ask for a clearer message from Thailand,” said Jim Walker, managing director at Hong Kong-based Asianomics Ltd. and former chief economist at CLSA Asia-Pacific Markets. “It’s time to just say the Bangkok elite have lost. The old guard has lost and it’s a new Thailand.”

To contact the reporter on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

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