Crude oil prices fell today as the greenback strengthened on Washington’s support for ailing mortgage firms Fannie Mae (FNM) and Freddie Mac (FRE).

Light sweet curde oil futures on the Nymex fell $1.19 dollars to $143.30 dollars a barrel. The contract is down from $147.27 dollars on Friday.

What if oil drops even further? Say back down to the $100 mark. Justice Litle says smart investors should condsider Asian stocks and Asian ETFs… 

When thinking about a possible market scenario — an outcome, a turn of events, or what have you — always try to ask yourself, “cui bono?”

Here is my hunch: If crude registers a huge drop out of left field, the major benefactor will be Asia… which means Asian stocks and ETFs could skyrocket.

For example, check out the South Korea ETF chart below.

South Korea is representative of most all the Asia ETFs (Malaysia, China, Taiwan and so on). Asia as a region has been badly beat up this year by the high and rising price of oil.

Asia’s worries over $140 crude are at least threefold: The high cost of fuel contributes to local inflation (a serious problem); the cost of fuel subsidies takes a big bite out of government budgets; and the higher cost of transport (thanks to fuel again) cuts mercilessly into export profits.

Waiting for the Miracle

This all explains why South Korea is off by a third from last year’s highs. There is fear that the “Asian Miracle” could be derailed by too expensive oil.

The miracle won’t be stopped, in my opinion, even if the price of oil stays sky high. There is just too much dynamism, too much determination and too much at stake. Expensive crude just makes Asia’s road a little tougher, that’s all.

But again, here’s where “cui bono” comes in.

Because there is so much concern… because so many are wringing their hands over Asia’s high-priced-energy troubles… a big drop in the price of crude oil could turn depressed Asian markets into a coiled spring.

Or maybe think of it like a strong but struggling hiker, laboring to carry on with a backpack full of rocks. If crude falls sharply, the backpack suddenly gets lighter. Gloom lifts and a second wind returns.

So would I go short crude oil right now? Probably not. There could be some short-term money in it — perhaps with a limited-risk put options trade — but that move is just a little bit too cute for me.

I would, however, take a hard look at the Asian country ETFs. They’ve all been beaten like a red-headed stepchild by crude’s rise… they’re all very cheap in comparison to three or six months ago… and they could all see a massive resurgence if crude breaks open to the downside.

Source: What If the Price of Oil Implodes?