Thailand's "red shirt" protesters called off a march to Bangkok's business district on Tuesday after the army warned they would face bullets and tear gas, but they threatened to stay in a shopping district "indefinitely"
As night fell, thousands of supporters of ousted premier Thaksin Shinawatra gathered across an intersection from the business district, using firecrackers to taunt hundreds of riot police and troops, many armed with M-16 assault rifles.
The red shirts also tightened security in the shopping district they have occupied for 18 days, raising tensions in a bloody six-week protest demanding new elections.
At least two luxury hotels in the shopping district announced they had closed for the rest of this week for safety reasons.
"We will stay here indefinitely," Nattawut Saikua, a protest leader, told reporters in the Rachaprasong district of high-end department stores and luxury hotels, adding they would only hold a rally at a second site in the business area if soldiers leave.
He called off the march after comments by an army spokesman who said troops would be tougher and use weapons if provoked.
Analysts say the protest has evolved into a dangerous standoff between the army and a rogue military faction that supports the red shirts and includes retired generals allied with twice-elected and now fugitive former premier Thaksin.
Despite the tensions, Thai stock prices rallied after falling 8.23 per cent since clashes between troops and demonstrators on April 10 that killed 25 people. Foreign investors resumed buying this week, pushing the index up 5.7 per cent on Tuesday, its biggest one-day gain in 15 months.
Brokers attributed the surge to a combination of factors: bargain hunting by foreign investors of Thailand's recently beaten-down shares, along with news the red shirts were calling off their march to the business district -- a development that pushed the market up significantly in the afternoon.
Analysts, however, doubt the rally indicates a new trend given few signs of a political compromise.
Swiss wealth manager Julius Baer urged its clients to stay on the sidelines. "Uncertainty remains very high in the short-term and this alone will prevent the market from recovering significantly until a clearer political outcome emerges," it said in a note to clients.