August 15th, 2011
01:54 AM GMT
(CNN) – For a month that's normally slow in the markets, August is turning out to be a roller-coaster ride.
First, the United States finally raises its debt ceiling but Wall Street does not react with much relief. Instead, weak spending and manufacturing data cause the markets to slide.
Then Europe piles on the problems. Italy and Spain start to give the European Central Bank heart palpitations with their bond yields rising, showing investors are demanding more to take on the risk of buying its debt.
The ECB starts to buy up Irish and Portuguese bonds, but that move fails to reassure anyone and European markets drop. Wall Street then freaks out over the instability on both sides of the Atlantic, prompting the Dow to drop by more than 500 points.
Then the ride gets even more frightening. Credit agency Standard and Poor’s downgrades U.S. long-term debt - the first time in history. As a result, we see massive sell-offs in markets around the world for several days.
For two days in a row, the Seoul Kospi dips too low for the local exchange and a circuit breaker kicks in to temporarily stop trading and the panic selling. At the same time, gold prices hit record highs as investors run to the precious metal as a safe haven in the storm.
All of this chaos is weakening the U.S. dollar and causing alarm in countries that depend on a stable greenback.
"In Asia, the concern will be over the U.S. dollar," says Peter Lewis, CEO of MF Global Hong Kong.
"Most Asian countries run large trade surpluses with the U.S. and accumulate large quantities of foreign exchange reserves in U.S. dollars which then can recycle back into U.S. government bonds and agency bonds."
So if the world's biggest players are losing out at the moment, where are the winners?
Yonghao Pu, chief investment strategist of UBS Asia Pacific, says look to the sidelines.
“I think emerging markets in Asia will benefit from this kind of a downgrade,” he says. “Emerging markets like China, Taiwan, Singapore and Indonesia. Relatively speaking, we are in better financial shape.”
Indonesia's Trade Minister Mari Pangestu agrees. She recently sat down with CNN's John Defterios and talked about the financial instability around the world.
“I think what will happen now is you end up having a diversification on the way you invest your reserves as well as investments in general and in one sense, it could probably lead to a larger inflow of capitol into other instruments including those in Asia.”
Jim Rogers of Rogers Holdings in Singapore is betting on agriculture, raw materials and currencies. He says, "Silver, rice, natural gas – whatever it is. Those are the people that will benefit.
“Some Asian currencies will benefit. I own the renminbi. I own the Japanese yen, the Singapore dollar. These currencies will continue to benefit as the US (dollar) is debased. Now this is not good news - that they're benefiting - for the world, but at least, it's places that will benefit."
For the past week and a half, we've had this stomach-churning ride in the markets. What will the rest of August hold? No one knows, but perhaps it's best to keep your side mirrors clean.
You can look for the best opportunities as the market landscape whizzes by.
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