BANGKOK - Thousands of supporters of exiled former Thai premier Thaksin Shinawatra braved torrential rain and flooding on Saturday in a rally to mark the third anniversary of the billionaire's overthrow by the military.

Despite the presence of several thousand riot police and soldiers, about 10,000 red shirts rallied to demand the dissolution of parliament and the resignation of the most senior royal advisor, Prem Tinsulanonda, whom they accuse of masterminding the coup that toppled Thaksin.

The government enacted a tough security law on Tuesday that

empowers the military to curb the movement of the United Front for Democracy against Dictatorship (UDD), as the red shirts are formally known, and break up protests in the event of clashes.

The red shirts, many from Thaksin's rural strongholds, massed in stormy conditions at Bangkok's Royal Plaza close to Prem's residence, dressed in raincoats and huddled under umbrellas in water almost half a foot (15cm) deep.

The demonstration was the fifth big show of support for the former telecoms tycoon since an army crackdown on the UDD in April, showing the resilience of the pro-Thaksin movement.

Despite living in exile after fleeing ahead of a two-year prison sentence for graft, Thaksin remains a major political stakeholder in Thailand because of his vast war chest and his influence over the rural masses. Thaksin was due to address the crowd in a phone-in later on Saturday. He is believed to be Dubai, where he has spent most of his time since skipping bail in Thailand more than a year ago. Organisers said they expected the crowd to swell in the evening.

Thailand has been locked in four years of political stalemate fueled by violent rallies, assassination attempts, dissolution of political parties and the seizure of Bangkok's main airports, which has left the country of 67 million deeply polarized.

DOWNGRADED RATING

Export credit and risk insurance agency ONDD this week downgraded its medium and long-term political risk rating for Southeast Asia's second-biggest economy because of continued uncertainty and the absence of a durable solution to the crisis. [ID:nSP405749]

Separately, an unknown number of people were injured on Saturday in clashes between villagers and supporters of the anti-Thaksin People's Alliance for Democracy (PAD) in northeastern Si Sa Ket province bordering Cambodia.

Channel 9 television said a state of emergency had been declared in the province's Kantharalak district, with riot police sent to break up fighting between yellow-shirted PAD protesters and villagers armed with slingshots and stakes.

Scores of villagers hurled rocks at cars and buses transporting 4,000 protesters to the disputed frontier, where they planned to rally to reclaim the 11th-Century Preah Vihear temple, which an international court awarded to Cambodia in 1962.

The Bangkok protest and the Si Sa Ket clashes will be another setback for Prime Minister Abhisit Vejjajiva as he works to revive the export-driven economy and hold together a fragile six-party coalition plagued by infighting.

Instability within the 9-month old government and the possibility of more clashes has sparked rumors of another coup. The speculation has had no impact on financial markets and most analysts say a coup is unlikely.

(Additional reporting by Prapan Chankaew in Kantharalak and Vitoon Amorn; Writing by Martin Petty; Editing by Dean Yates)

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