Investor interest in Southeast Asian stock markets--particularly those of Thailand, Indonesia, and the Philippines--has been very strong over the past year, thanks to healthy trends in domestic consumption and capital spending spurred by supportive local fiscal and monetary policies. While the larger emerging-markets economies such as China, India, and Brazil have been posting growth rates somewhat below market expectations, Southeast Asian countries have been growing at or above expectations. Thanks in part to these factors, Southeast Asian stock markets have rallied strongly over the past year, which is evident in the recent performance of market-cap-weighted country ETFs.

Economists Are Positive, but Increasingly Cautious, on the Region's Prospects
The International Monetary Fund, World Bank, and Asian Development Bank have all recently issued fairly consistent growth forecasts and outlooks for the Asian region. All three forecast mid-single-digit GDP growth for the ASEAN-4 (Indonesia, Malaysia, Thailand, and the Philippines) over the next two years, driven by strong domestic demand and infrastructure investment, growth in intraregional trade, and an improving external demand environment, which will be positive for the more export-oriented economies. Unemployment remains low and wages are rising.