Greek Default Fears Ease, Asian Stocks Climb Higher: How to Trade (FXI, EWY, EPP, FXP, EWV)

Most Asian stock markets ended Wednesday trading in positive territory, mainly on the belief that the Greek Parliament would pass a set of austerity measures aimed at getting the country's finances in order and ending the near-term possibility of a default by Greece on its debts. Earlier in the week, the Greek government received an ultimatum to pass the austerity measures from the European Union (EU). The European Union said that if Greece does not push through its current round of austerity measures, the EU will withhold future payments of the 110 billion euro emergency loan that Greece secured last year from the European Union and the International Monetary Fund (IMF). Without the EU/IMF loans, the Greek government would run out of money to pay its bills in about one month. The austerity measures, which include tax hikes, spending cuts and the sale of state assets, have proven unpopular among the Greek public and have led to a 2-day nationwide strike and thousands of protesters attempting to disrupt the parliamentary vote on the measures. The European Union is an important trading partner of Asia's export-driven economies and the possibility of a Greek default has rattled Asian investors. If the Greeks default, it may lead to the end of the euro as a currency and destabilize one of Asia's most important export destinations. As the likelihood of a Greek default seems to have decreased, Asian markets have for the most part reacted positively. The Nikkei 225 index of Japanese stocks ended Wednesday trading up 148.28, or 1.54%, at 9,797.26. The KOSPI Composite Index of Korean stocks climbed 31.51 points higher, or 1.53%, to end the Wednesday trading session at 2,094.42. The TSEC weighted index of Taiwanese stocks rose 94.52 points, or 1.11%, to reach 8,573.38 by the end of Wednesday. The Straits Times Index of the Singapore stock market moved 28.95 points higher, or 0.95%, to end the day at 3,079.74. The SSE Composite Index of stocks traded on the Shanghai Stock Exchange was one of the few Asian/Pacific stock exchanges to end Wednesday lower than the previous trading day's close. The SSE Composite Index fell 30.72 points, or 1.11%, to end Wednesday trading at 2,728.48. Investors who feel that the repercussions of a Greek default would be to severe for the international community to let a default occur may see Asian ETFs as a way to profit from a stabilization of Greece's finances. Most of these economies are export-driven and have higher growth rates than their European trading partners, so they could see tremendous upside if Greece avoids a default and the troubled countries in the eurozone seem less at risk of financial collapse. The iShares FTSE China 25 Index Fund FXI, the iShares MSCI South Korea Index EWY and the iShares MSCI Pacific Ex-Japan EPP are three ETFs worth consideration if Greece avoids a default. These ETFs are a good way to get broad exposure to Asian markets that would benefit from a Greek recovery. On the other hand, investors who feel that the passage of the austerity measures would simply be a short-term fix, may want to consider shorting Asian stocks. Even if the Greek Parliament passes the austerity measures, the Greek people may simply reject them and force the government to end the measures. The ProShares Ultrashort FTSE China FXP and ProShares UltraShort MSCI Japan EWV ETFs could be used to short a wide range of stocks in Asia's two biggest economies.