ETF Plays for China's Slowdown

Yes, China's Purchasing Managers' Index published Oct. 1 rose to 51.2, signaling the second straight month of gains. And no, it is does not seem likely the world's fastest-growing major economy will ebb into a recession this year or next.

On the other hand, there is no getting around the fact that Chinese economic growth is slowing. Global investors now must ween themselves from the China addiction of the past several years, but the problem with avoiding China is that investors must dodge scores of other markets and themes, too.

How China goes, so go a plethora of emerging markets that have come to rely on China as a primary destination for their exports. So while China may successful in orchestrating a soft landing for itself, plenty of other countries are in a bumpy ride thanks to slowing Chinese growth. These are the ETFs you'll want to keep an eye on the long China languishes.

Embrace these two...

ProShares Ultra Short Brazil (NYSE: BZQ): China is Brazil's top trading partner and the iShares MSCI Brazil Index Fund (NYSE: EWZ) is heavily weighted to energy and materials producers that depend on Chinese demand in a big way. China's woes only serve to compound Brazil's domestic economic issues (high inflation) to the point where it's impossible to be bearish on China and not bearish on Brazil.

Direxion Daily Latin America 3X Bear Shares (NYSE: LHB): Brazil isn't the only Latin American country that has deep China ties. Copper king Chile does, too. China has been the 800-pound gorilla in the copper market for several years now and that's good for the iShares MSCI Chile Investable Market Index Fund (NYSE: ECH) when the global economy is flourishing. In this environment, copper prices are plunging, pressuring ECH in the process.

Avoid these two...

iShares MSCI Hong Kong Index Fund (NYSE: EWH): The iShares MSCI Hong Kong Index Fund is an obvious ETF to put on a list of plays to avoid thanks to China and the proof is in the pudding: EWH and the iShares FTSE China 25 Index Fund (NYSE: FXI) have basically moved in lockstep with each other this year.

U.S. Oil Fund (NYSE: USO): Every data point that hints at slower Chinese growth is just one more paper cut for oil bulls. With oil demand in the U.S. also slowing, it is almost impossible to envision oil prices going higher without the help of increased demand from the U.S. and China. The two countries are by far the two largest oil consumers in the world.