SINGAPORE: Five key political risk themes for markets to watch in Asia in the coming week.

Showdown in Thailand as 'red shirts' rally
Thailand faces another flashpoint in its five-year political crisis with a mass rally of the "red shirt" supporters of ousted former Premier Thaksin Shinawatra planned for Sunday in Bangkok. The military-backed government of Prime Minister Abhisit Vejjajiva has invoked a tough security law giving the authorities broad powers to crack down on any unrest, and both sides are trading accusations that the other plans to provoke violence. Despite this, foreign investors are turning increasingly bullish on Thai stocks, for three main reasons — Thai assets are already trading at a substantial risk discount, the economy has rebounded well from the ravages of the global downturn despite bouts of unrest, and the government is widely expected to survive the impending showdown. Yet the divisions that polarise Thailand remain far from a resolution, and with elections due by next year and the king still being treated in hospital, the medium-term risks may be higher than some bullish investors realise.

Row over women heightens India policy risk
A contentious bill reserving a third of parliamentary seats for women has sparked political chaos. While the ruling coalition still has a majority, the decision of two parties to withdraw their outside support for the government and a third key ally's dissent over the bill take away the cushion the Congress party had in parliament, making it more dependent on the cooperation of the opposition to smoothly run parliamentary affairs. The standoff is bad news for a government trying to push through important economic legislation and ratify the 2010/11 budget. The bill, already passed in the upper house, will be debated probably in April in the lower house. But the first sign of any fallout will come with the debate over the budget in the coming week.

Chinese premier may offer clues on economy and US ties
Chinese Premier Wen Jiabao gives his annual post-parliament news conference on March 14, offering clues on the government's outlook for the economy and major diplomatic issues, including the rocky relationship with the United States. The appropriate level of the yuan remains a highly controversial geopolitical issue with major global economic implications, and Wen's speech will be watched for any hint of a change in currency policy. A row over hacker attacks on Google Inc which the company blames on China, and Chinese anger over US arms sales to Taiwan have clouded ties between Washington and Beijing, and a new row may be looming over sanctions on Iran.

Japan policy rifts and deficit unsettle markets
The Bank of Japan holds its next policy meeting on March 16-17. A rift between the government and central bank on dealing with deflation is unsettling markets, and making monetary policy harder to predict. With Greece and Spain in the global spotlight due to their parlous fiscal position, some investors have also been asking whether Japan could be the next market bombshell. While that is highly unlikely, Japan's vast public debt is a cause for concern, as the government of Prime Minister Yukio Hatoyama struggles to give the economy the stimulus it needs without compromising the need for fiscal prudence.

Can Indonesia's president put bank battle behind him?
A bruising parliamentary battle over the fate of the two key reformist technocrats in the cabinet of President Susilo Bambang Yudhoyono has ended with a compromise of sorts — legislators voted for further investigation of the controversial rescue of Bank Century but did not mention Finance Minister Sri Mulyani Indrawati or Vice President Boediono by name. The question now is whether Yudhoyono can regain some momentum for economic and legal reforms that investors want to see. Indonesia was one of the star emerging markets last year with stocks up 90%, government bonds up 20%, and the rupiah, Asia's best-performing currency, up 17% against the dollar. Its strong domestic economic fundamentals are a key reason for the bullish sentiment, but if old-school politicians within the ruling coalition continue blocking reform, sentiment will suffer. — Reuters