For a Tasty Return, Try Thai

07/29/2010 10:20 am EST

Focus: ETFS

Doug Fabian

Editor, Successful ETF Investing, ETF Trader's Edge, Weekly ETF Report, and ETFU.com

Doug Fabian, editor of Making Money Alert, says the Southeast Asian country is growing nicely and its market is performing well, despite recent political violence.

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 (NYSEArca: THD). This [exchange traded fund] offers 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 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 time. 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 [the first quarter] from the same quarter in 2009. Increased exports largely fueled the nation's [first-quarter] 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 ten categories, [including freedom from corruption and investment freedom], used by the Heritage Foundation to assess economic freedom. Thailand's economic freedom score ranked tenth 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 (85 people were killed in anti-government protests this past spring—Editor), 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, so if you want to diversify your holdings, you may want to consider THD for a small portion of your portfolio. (It closed below $50 Wednesday—Editor.)

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