When Thailand's stock market swooned last month, analysts put the blame on widespread rumors over the deteriorating health of the country's revered monarch, who had been hospitalized with the flu. The next day, Oct. 15, brought more rumors and an even sharper sell-off, capping a two-day 7 percent drop in the benchmark stock index.
Now Thai authorities are targeting citizens they allege spread rumors about the king's health in order to profit from the selloff.
Over the past week, Thai authorities have arrested three people on charges of disseminating false data. Police say that further arrests may follow and government officials warn that "national security" is at stake in the case.
The arrests have sparked complaints of a witch-hunt by arch-royalists using the sensitive issue of the monarchy to suppress free speech. Two of the suspects, who are former stock-market analysts, have been charged under a controversial and wide-ranging computer crimes law.
The case has highlighted deep-seated fears among Thais over the eventual passing of King Bhumibol Adulyadej, the world's longest-reigning monarch, who turns 82 in December. He is still in the hospital after being admitted on Sept. 19.
Prime Minister Abhisit Vejjajiva told Reuters on Saturday that the king had recovered from his illness and would soon be discharged from hospital, in line with the advice of doctors.
In a bid to calm the nation's nerves, King Bhumibol has made several public appearances at the hospital, including one after the stock market selloff. On Nov. 2, he was shown on TV taking part in a Thai holiday ritual of setting a candlelit float on water.
Monarchy and politics intertwined
As a constitutional monarch, Bhumibol is said to be above politics. But the symbolic power and status of the monarchy has long been a crucial element in a political system that runs on personal networks and patronage.
The monarchy is deeply revered in Thailand and though it has limited powers, it has served as the crucial guarantor of national unity. King Bhumibol's positions on Thailand's political upheaval over the years (the country has had ten coups since 1971) have often proved decisive, ensuring generally peaceful transfers of power even when carried out by extra-constitutional means.
Many Thais fear that Crown Prince Maha Vajiralongkorn, the king's designated successor, lacks his father's stature and could usher in a period of protracted political instability.
"Soon … they are going to need to work harder to resolve social, economic, and political problems. And the possibility of failure leaves many (Thais) deeply pessimistic," he says.
The debate over succession is largely conducted in private for fear of breaking strict lese-majeste laws, the use of which has spiked in recent years. The computer-crimes law has been used to prosecute internet users over royal slurs, including an engineer sentenced in April to 10 years in prison for posting anti-monarchy videos on YouTube.
Stock market sensitive to rumors about monarch
In this climate, rumors like those that roiled the stock market spread fast, says Chiranuch Premchaiporn, who runs Prachatai, a left-leaning news website.
"In a society with a lack of democracy and platforms for free expression and a right to access information, this is the way that people react," she says.
Thiranant Wipuchanin, one of the suspects arrested last week, had posted a translation of a Bloomberg News report on October 14 about the stock markets decline on concerns about the king's health.
The translation went up after the market had already closed so could not have effected stock prices, says Ms. Chiranuch.
The other suspect detained on the same day reportedly posted a similar item and commentary on "Same Sky Books," another left-leaning website. The SET said it was reviewing his investment accounts.
Observers have questioned why the police have zeroed in on the two websites, both of which have already been investigated over alleged online royal slurs and have been accused by government officials of subversion.
"They're going willy-nilly at it, without seeming to have much of a case," says a Western diplomat.
As webmaster of Prachatai, Chiranuch was charged earlier this year under the computer-crimes act for failing to delete postings. She denies the charges.
Thailand's stock-market regulator is separately investigating transactions placed via two European brokerages in Hong Kong. In Thailand, as in many jurisdictions, it's illegal to knowingly spread rumors to make a profit in the stock market.
Former prime minister's allies turn up heat
Government officials have said that the rumors over the king's health may have been politically motivated. This is seen as a dig at former Prime Minister Thaksin Shinawatra, who was ousted in 2006 by the military and is living in exile in Dubai.
In recent weeks his allies have turned up the heat on Mr. Abhisit's government. Cambodia's Prime Minister Hun Sen has appointed Mr. Thaksin as an economic adviser, infuriating the Thai government, and both countries have withdrawn their ambassadors in a tit-for-tat row.
Securities analysts say the uproar over the royal rumors sends a chilling signal to investors. Some argue that the drop in Thai shares may have been driven by profit-taking in a bull market as much as concerns over the king's health. Indeed, the following week saw other Asian markets give up some of their gains, just as Thailand's had.
"Arresting analysts for doing their jobs is probably not the best way to attract foreign capital," says a securities analyst in Hong Kong.