(Bloomberg) -- Thailand could surprise investors yet again when lawmakers meet soon to pick a prime minister after a disputed election in March.
The most likely scenario remains the return of junta leader Prayuth Chan-Ocha as prime minister. His pro-military party, Palang Pracharath, has assembled a 134-seat alliance in the 500-member lower house, which would give him enough for a simple majority if the 250 military-appointed senators also back him in a combined vote that could take place by the end of the month.
That outcome has reassured some investors: The Thai stock market is up 4% so far this year and the baht is one of the world’s best performing currencies. Beneath the surface, however, is an anti-junta coalition that only just missed a majority, and whose ongoing effort to boot Prayuth from power could yet complicate the picture.
"The baht has been pricing in the positive of the election outcome having more clarity despite the negative external environment triggered by the U.S.-China trade war," said Tsutomu Soma, general manager of the investment trust and fixed-income department at SBI Securities Co. in Tokyo. "If there are more political jitters, the baht may reverse the gains."
Without a majority in the lower house, the pro-military coalition is likely to be unwieldy. Still the alternative scenarios below may lead to even greater uncertainty and gridlock, upsetting current investor calculations.
1. Anti-Junta Gambit
The anti-junta coalition is led by Pheu Thai, a party linked to exiled former premier Thaksin Shinawatra. It has 245 lower-house seats and argues it was robbed of a majority by an unconstitutional interpretation of electoral rules. Prayuth unseated a Pheu Thai-led government in the 2014 coup.
One of Pheu Thai’s leaders has said the bloc is willing to give key ministerial positions or even the premiership to Bhum Jai Thai party chief Anutin Charnvirakul if he joins the alliance. While Bhum Jai Thai’s seats would give the coalition almost 300 members of parliament -- enough for a stable government -- the military establishment has repeatedly ousted governments led by Thaksin’s allies.
2. Third Front
Bhum Jai Thai and Democrat are key, mid-sized swing parties, each with about 50 seats. They have yet to say which coalition they will join. One possibility is they form a third-front with other smaller parties that aligns neither with the junta’s proxies nor the alliance opposed to the military establishment.
Such a mix is another recipe for gridlock as three camps -- pro-military, anti-junta and non-aligned -- duel for influence and power.
3. The Outsider
A person who isn’t an official prime minister candidate for a party can still become the leader under the military-backed constitution, the country’s 20th. Parliament would have to vote to allow this option in a joint sitting.
The possibility of the so-called "outsider" would come into play if Prayuth fails to sweep the Senate and no other named prime minister candidate is able to muster the needed support.
One person floated in local media as a potential consensus outsider candidate is Ampon Kittiampon, a privy councilor to King Maha Vajiralongkorn and a member of the Crown Property Bureau board. Ampon couldn’t immediately be reached for comment.
"We could see an outsider premier candidate if parliament couldn’t agree on any of the choices," Punchada Sirivunnabood, a visiting fellow at Singapore’s ISEAS-Yusof Ishak Institute and an expert on Thai politics. "There’s usually some truth in Thai political rumors, so it’s likely that Ampon would be one of the candidates."
--With assistance from Yumi Teso.
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