How to Profit after Obama's Debt Deal Sends Asian Stocks Soaring

All of the significant stock market indexes in the Asia/Pacific region ended Monday trading higher after news broke that President Barack Obama and Congressional leaders had reached a deal to raise the United States debt ceiling in order to prevent the country from defaulting on its debts. The deal between President Obama and House Speaker John Boehner and other Congressional leaders calls for the debt ceiling to be raised by more than $2 trillion, which would be offset by nearly $2.5 trillion in spending cuts. The deal still needs the approval of the House of Representatives and the Senate and may require bipartisan support in the House of Representatives because Republican House Speaker John Boehner faces opposition to the deal from within his party. Many Republican congressmen, who have the support of the Tea Party movement, feel that Boehner is conceding too much in his deal with President Obama. Raising the debt ceiling should allow the government to continue paying its bills until after the 2012 elections, which is important to President Obama because he doesn't want to go through another debacle like this while he is campaigning for re-election. In a sign of just how important the American market is to Asian exporters, every major stock market in the region ended the Monday session trading higher. Besides being the most important export market for many Asian economies, a default by the United States government could have led the global economy into a financial meltdown. Asian markets responded with enthusiasm after the deal was announced. The KOSPI Composite Index of Korean stocks soared 39.10 points, or 1.83%, to end the Monday trading session at 2,172.31. The Nikkei 225 index of Japanese stocks surged 131.98 points, or 1.34%, to end Monday trading at 9,965.01. The Hang Seng Index of Hong Kong traded stocks jumped 223.12 points, or 0.99%, to end the day at 22,663.37. The Straits Times Index of the Singapore stock market climbed 26.01 points higher, or 0.82%, to end the day at 3,215.27. The TSEC weighted index of Taiwanese stocks rose 57.20 points, 0.66%, to reach 8,701.38 by the end of Monday. The SSE Composite Index of stocks traded on the Shanghai Stock Exchange was the lowest rising major stock market index in the Asia/Pacific region on Monday. The SSE Composite Index rose just 2.05 points, or 0.08%, to end Monday trading at 2,703.78. Investors who want to profit from the good news should take a look at Asian ETFs like the iShares MSCI South Korea Index EWY, the iShares MSCI Japan Index Fund EWJ, the iShares MSCI Singapore Index EWS and the iShares MSCI Hong Kong Index EWH. Each of the countries' stock markets represented by these ETFs were big gainers after news broke of the deal between President Obama and Congressional leaders and most of their economies have much better growth prospects than America does. Although reaction to initial news of the deal was positive, the long-term effects of the measures taken to raise the debt ceiling may actually do more harm than good. Reducing government spending during tough financial times isn't likely to do much for America's growth prospects. Consumer spending will probably take a hit because much of the cuts will be to programs that benefit people who depend on government assistance for much of their income. If American consumers lower their spending any further, Asian economies will suffer. Investors who feel the deal will lead to reduced consumer spending should take a look at the ProShares UltraShort MSCI Japan EWV ETF and the ProShares UltraShort FTSE China FXP. These two economies are still heavily dependent on the American export market and are too big to seek out new markets if America fell back into recession. Another investment option for investors would be to move assets into the CurrencyShares Swiss Franc Trust FXF, the SPDR Gold Shares GLD or the iShares Silver Trust SLV. The Swiss Franc has become an increasingly popular safe haven currency as the United States, Japan and countries from the eurozone face financial difficulties. Although a deal has been reached to save the US government from default, the markets were spooked and confidence in the US dollar is low. Gold and silver may have even more upside in a world where the value of the US dollar is uncertain.