Even though equities have been retreating in much of the world, there are markets in Asia that have fared well so far in 2010. Not only have I noticed the trend, but I have my eye on several country-specific exchange-traded funds (ETFs) in that region. This ETF Talk is the second of a three-part series that will focus on one of those Asian funds each week in the Making Money Alert.

Thailand is on my radar screen as a profitable market, particularly when so many others have pulled back this year. That’s why I am looking at the iShares MSCI Thailand Investable Market Index Fund (THD). I like to use ETFs to invest in a specific country’s stock market to gain the advantages of diversification, reduced risk and low fees. In the case of THD, this is an ETF that offers such an opportunity by seeking investment results that correspond to the price and yield performance, before fees and expenses, of the MSCI Thailand Investable Market Index. The index seeks to match the performance of the Thai equity market.

The fund is up 12.16% so far this year to produce an especially impressive performance when you consider that the Dow Jones Industrial Average has fallen 1.92% during the same timespan. A key reason is that Thailand’s economy is growing much faster than in most other places around the world.

Indeed, Thailand’s Finance Ministry raised its 2010 forecast for economic growth to between 5% and 6% in June to mark the second such upward revision in the past three months. The government had projected 2010 gross domestic product growth of 4% last December and 5% during March. Rarely are any countries these days predicting increased economic growth but Thailand clearly is a most welcome exception. To keep the economy growing, the nation’s central bank has held interest rates at 1.25%, its lowest level since July 2004.

Thailand’s economic recovery is notable, since other countries, such as the United States, have pursued low interest-rate policies to spur economic growth but have failed to achieve the same results. Thailand is one of Southeast Asia’s largest economies -- second only to Indonesia. And, the Thai economy expanded 12% during Q1 2010 from the same quarter in 2009. Increased exports largely fueled the nation’s Q1 2010 economic growth. To that end, the government raised its 2010 export growth forecast in late June to 22.5%, up from the 18% that it had projected in March.

Another plus is that Thailand’s economic freedom score of 64.1 is 1.1 points better than last year, as the country improved in five of the 10 categories used by the Heritage Foundation to assess economic freedom. Areas of improvement include freedom from corruption and investment freedom. Thailand’s economic freedom score ranked 10th out of 41 countries in the Asia–Pacific region, and its score is higher than the world and regional averages.

Although Thailand has endured political unrest, it boasts one of the world’s top equity performances so far this year. The factors that led to its improvement in the first half of 2010 appear to be sustainable throughout the year, so if you want to diversify your holdings, THD is a fund that you may want to consider for a small portion of your portfolio.

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