While 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 begins a three-part series that will focus on one of those Asian funds each week in the Making Money Alert.

An ETF that you may want to watch and possibly add to your portfolio is the iShares MSCI Malaysia Index (EWM). Launched in 1996, EWM has one of the longest histories of any ETF. EWM seeks investment results that correspond to the price and yield performance of publicly traded securities in the Malaysian market, as measured by the MSCI Malaysia Index.

This fund normally invests at least 95% of assets in the securities of the underlying index and in American depository receipts (ADRs), based on the securities in the underlying index. The index consists of stocks traded primarily on the Kuala Lumpur Stock Exchange. The fund rose a respectable 5.93% during the first half of 2010 from the opening of trading on Jan. 4 until the end of the second quarter on June 30. That compares quite favorably to a 6.30% drop in the Dow Jones Industrial Average during the same period.

Past performance is not a guarantee of future returns, but it does show that the Malaysian market has been more resilient than the U.S. stock market so far this year. Here are two reasons why the Malaysian market may be able to weather the financial storms better than more established markets in the United States and Europe. First, the Kuala Lumpur Stock Exchange was buoyed by Malaysian government stimulus packages in November 2008 and March 2009. Those government funds helped to keep the nation’s economy from shrinking as much as otherwise would have been the case. Second, the country’s economy was expected to grow at 2-3% in 2010 but now is projected to expand at a pace of 5.6% in 2010 and 5.8% in 2011. Amid rising concerns among investors about a possible double-dip recession, such economic growth projections are pretty impressive.

Of course, the Malaysian government’s spending has sent the nation’s budget deficit higher. But the situation is not as bad as what’s occurring in Portugal, Greece and Spain, or even larger Asian markets. For example, the national debt in Malaysia equals about 42% of GDP, compared with 187% in Japan or 110% in India. With 95% of government debt financed domestically, Malaysia’s fiscal position is much better than many other countries in Asia -- and in many other regions around the world.

Malaysia is not among the four original “Asian Tigers” -- Hong Kong, Singapore, South Korea and Taiwan -- but it is part of the next wave of countries in the region that seemed destined for strong economic growth. The country has developed into the world’s largest Islamic banking and financial center. It has a population of 27 million, a bit bigger than Texas, and the nation is Southeast Asia’s second-wealthiest country with a per capita gross domestic product (GDP) of $8,209. Among other Southeast Asian countries, it ranks behind the per capita GDPs of $37,597 in neighboring Singapore and $30,863 in Hong Kong, but ahead of Indonesia’s $2,246.

As a relatively nascent independent country, Malaysia lacks a well-established free-market economy and still uses five-year government plans to plot economic growth. The current plan is aimed at shifting toward high-value economic activities, as well as improving the manufacturing sector. With a boost from Japan, Malaysian exports from heavy industries previously became a key part of its economic growth. Malaysia is a large exporter of electrical goods and appliances, as well as one of the world’s largest manufacturers of computer hard disks.

The iShares MSCI Malaysia Index (EWM) has assets of $643 million, with about 32% of those assets concentrated in financials, 19% in industrials and roughly 15% in consumer staples. As one of the top stock markets in the world during the first half of 2010, Malaysia is worth considering as a place to invest a small portion of your holdings.

To obtain my latest ETF advice and my stop prices for each recommendation, I encourage you to subscribe to my ETF Trader service. As always, I am pleased to answer any of your questions about ETFs, so do not hesitate to email me by clicking here. You may see your question answered in a future ETF Talk.