While Poland and Thailand are two of my favored markets for 2013, they’re difficult for US retail investors to access. Some companies in both countries have over-the-counter listings in the US, but they’re either extremely low volume or in sectors which I prefer to avoid.

That said, excellent exchange-traded funds (ETFs) are available that accurately reflect the two countries’ economic makeups.

When it comes to investing in Thailand, the broad-based iShares MSCI Thailand Index Fund (NYSE: THD) is the best option available to US investors.

The ETF holds the local shares of 90 Thai companies, with financials dominating at 39.5 percent of the portfolio. While Thai banks have experienced an earnings slowdown in recent quarters, they’re working to reverse that trend by gradually increasing fees and growing their insurance businesses. They’ve also been gradually growing their loan portfolios over the past year, but they’ve only been taking on the most creditworthy clients because their emphasis has been on making high-quality loans.

Lending will likely pick up over the course of 2013, thanks to the increased pace of infrastructure construction. While the government is footing the bill for much of that development, about a third of the projects slated to start over the next two years are being privately contracted and constructed. Many of those projects involve highway and canal work.

That will drive demand for loans by many of Thailand’s most creditworthy borrowers. Many of those loans will include government guarantees, a win-win for the banks and engineering and construction firms involved.
The top banks in the fund’s portfolio include Siam Commercial Bank, the country’s third-largest commercial bank in terms of assets, deposits and loans.

The fund is also heavily allocated to energy and materials names at just over a quarter of assets, followed by telecoms and consumer names.

Other top holdings include PTT PCL, a leading Thai energy firm, and telecom operator Advanced Info Service and consumer staples company CP All PCL.

The fund is relatively inexpensive with a 0.59 percent annual expense ratio, making it cheaper than any closed-ended funds which focus on the country. It has also outperformed them with its passive indexing investment approach, so there’s little reason to pay the added cost of active management. IShares MSCI Thailand Index Fund is a buy under 88.

The best Polish ETF is Market Vectors Poland ETF (NYSE: PLND). This ETF is fairly representative of the overall composition of the Polish stock market, with large-cap companies comprising 40 percent of holdings and mid-caps a third. Smaller enterprises receive a nearly 20 percent weighting.

As with the Thailand ETF, the Polish fund’s largest allocation is the country’s financial sector at 36.5 percent of assets. But as I pointed out in this week’s main feature article, the Polish banking sector is extremely strong and will also benefit from the expected infrastructure boom in the country.

The fund’s next largest allocations are to Poland’s energy and materials sectors. As with the US, Poland is home to large shale formations containing natural gas and the government is eager to export those reserves. The country is believed to have a reserve base of 5.3 trillion cubic meters of natural gas, fueling hopes among its leaders of achieving energy independence. They’re also eying the gas as a potential export commodity, since most of Europe’s gas needs are currently being met by Russia, a country that has proven itself willing to play politics with its resources.

Poland is also the world’s ninth-largest producer of coal. While much of its production is currently used to generate the country’s electricity—about 90 percent of the country’s baseline electricity is generated using coal-fired plants—Poland is working towards developing a lower emissions economy and is keen to export more of its coal production to countries such as China.

One potential downside to Market Vectors Poland ETF is that it has relatively little exposure to the country’s consumers. However, it offers broad exposure to the key themes that are driving wealth creation in the country.
Market Vectors Poland is solid buy under 26.