Libyan Situation increases risk of Asian equity pullback
February 21, 2011 Leave a comment
The Libyan protests could lead to regime change or anarchy, because the military is not autonomous. It is a small institution (with approximately 100,000 personnel), and Libya has only had one ruler. There are two separate pro-Gadhafi forces within the Libyan military establishment: the People’s Militia and the Presidential Guard. Seif al-Islam’s repeated warnings of civil war might have to do with fears that the army will fracture. There are signs that some military elements in Benghazi have already switched sides
This is potentially far more worrying than Egypt, and today is likely to be the big showdown. A massacre is possible, but it is also possible for part of the army to take the protestors side, which if it occurs could see disruptions to crude supplies, which in turn could force a bigger sell-off in stocks pretty much globally.
Watch the news closely this afternoon because if things get out of hand – which looks likely, it will send oil flying, just like gold and silver. Risk is high, death tolls will be higher, and given the domino effect is beginning to play out, the Libyan situation has the potential to force another correction in Thai stocks even though foreign flows have returned in a big way.