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Last week we talked about Singapore and Thailand - two Asian economies that are quietly taking off. Today I want to add to those thoughts with a few more key points that opportunistic U.S. investors should know about Thailand, in particular.

Over the weekend, the Thai currency, the baht, rose to its highest level since 1997 due to an improved outlook for economic growth and expectations of more investor inflows. A current-account surplus of $5.42 billion this year through July, and the fact that the Bank of Thailand has raised its benchmark interest rate twice this year, have also helped the baht post the second-best performance among Asia's most-traded currencies excluding the yen.

"There has been quite a lot of demand to buy the baht from offshore, probably from foreigners to buy Thai stocks and bonds," Kozo Hasegawa, a Bangkok-based foreign-exchange trader at Sumitomo Mitsui Banking Corp., told Bloomberg News. "Money is flowing into Asia on the region's strong economic outlook."

The rise in the currency has coincided with a 30% advance in Thailand's SET Index since May, when government troops smashed anti-government protests.

That advance is almost entirely from locals, because investments from the G3 countries - the United States, the Eurozone, and Japan - are at an 11-year low due to the political unrest of the spring. Overseas investors sold a record $1.81 billion of Thai stocks in May, when fighting between troops and anti-government protesters left 89 people dead. Barclays Capital reported that emerging-market funds have invested less in Thai stocks and bonds this year than any Asian market except Singapore.

Bloomberg reported that global funds are slowly creeping back, as they bought $298 million of Thai stocks last week. That was the biggest net purchase in almost six months, and it helped send the SET to its highest level since November 1996.

However, the market is still very cheap, sporting a forward price/earnings (P/E) multiple of around 11-times. Again, this is largely due to fears over the political climate. Also remember that the Thai market is only just emerging from a twelve-year bear cycle that began with the Asian currency crisis in 1997. It's also very thin, with a total market capitalization of less than $10 billion.

Still, Thailand's economy expanded 9.1% in the second quarter from a year earlier after gaining 12% in the previous three months, making for the best two quarters of growth since 1995.

And, as I pointed out last week, Thai companies are becoming globally competitive. The action in this market isn't just a paper-trading, stock-market phenomenon; it's real managers building real global businesses brick by brick.

And because of the recent political upheaval, many of the big financial players are underexposed to this dynamic economy.

KGI Securities reported that its foreign clients still had "slim" positions in Thailand, suggesting there is room for further inflows.

"With the political unrest, many foreign institutional investors are still underweight on Thailand," Jessada Sookdhis, a fund manager at Ayudhya Fund Management, told Bloomberg. "Since last month, we have seen comparatively higher inflows into Thailand. The political situation is very calm here now."

The Bottom Line: There's no bubble in Thailand, just some new attention in a thin market after a long period of avoidance. The iShares MSCI Thailand Index Fund (NYSE: THD) 20.3% is up 25% since the start of July. So stick with it for now, even if there's some volatility, as latecomers should continue to push values higher.

Source: Thailand: An Asian Tiger Lurking Low in the Reeds