BANGKOK - Thai King Bhumibol Adulyadej's condition is good but he needs time to recover from pneumonia, the palace said on Wednesday after concerns over his health sparked a tumble in Thailand's financial markets.

The king, the world's longest-reigning monarch and Thailand's single unifying figure, is regarded as semi-divine by many of the country's 63 million people. His health is an extremely sensitive topic.

Thai stock prices and the local baht currency fell sharply on Wednesday on concerns over his condition.

His majesty the king's general condition is good, said a statement from the Bureau of the Royal Household after markets had closed. However, a further period of recovery of lung pneumonia is necessary, as in the case of the elderly.

King Bhumibol, 81, has been in hospital since September 19, making this his longest period of treatment since suffering a blood clot in 2007.

The statement said he would stay in hospital for continuous rehabilitation therapies, the first suggestion he could remain in hospital for some time.

Over the past few weeks many Thais have gathered at Siriraj Hospital where he is being treated to sign get-well books for the king or lay garlands in front of a monument of Prince Mahidol of Songkla, the king's father, to pray for a speedy recovery.

Strict lese majeste laws in Thailand make comment on royal matters risky.

The king's condition is followed closely in financial markets, in part because of concerns about succession. Bhumibol's son and presumed heir, Crown Prince Vajiralongkorn, does not command his father's popular support.

A focus on the issue of royal succession would add another element of uncertainty to a polarizing four-year political crisis that has put a squeeze on foreign investment in Southeast Asia's second-biggest economy.

Underlining that, the cost of insuring Thailand's sovereign debt rose on Wednesday, with five-year credit default swaps climbing 5 basis points to 89.8 bps, CDS monitor CMA Datavision said. Credit default swaps (CDS) are used by investors to insure against the risk of debt default or restructuring.

Thai stocks slid more than 4 percent, led by foreign selling, before recouping some ground to end down 2.04 percent. The baht currency fell, trading at 33.46 per dollar against an intraday high of 33.20 earlier.

The king's health also made headlines last December at his 81st birthday, when he failed to give his traditional address to the nation. His daughter, Crown Princess Maha Chakri Sirindhorn, said then that he had a throat infection and was on a saline drip.

(Reporting by Jason Szep; Editing by Alex Richardson and John Chalmers)

Thailand