China's PMI Data Could Hinder, Help These ETFs (HAO, FXI, MCHI)

China's manufacturing activity slowed again in March, an initial survey by HSBC revealed while most Americans were fast asleep late Tuesday night. The HSBC Purchasing Manager's Index (

) dropped to 48.1 this month from 49.6 in February, the fifth monthly decline and perhaps another sign that the world's second-largest economy is in fact in hard landing mode. The PMI data, for which readings below 50 are considered negative, comes on the heels of China's 2012 GDP growth forecast of 7.5%, the country's lowest since 2004. Not surprisingly, the PMI will likely increase speculation that China's exports are suffering. That's a reasonable theory after China posted its largest trade deficit in a decade last month. Maybe the only silver lining is that another batch of concerning economic data could spur policymakers to lower interest rates, a move that would likely be greeted with open arms by global investors. For now, these ETFs could be adversely impacted by the PMI data, but if China does cut interest rates, these funds could benefit as well.

The Guggenheim China Small Cap ETF is by no means the largest China-specific ETF, but it does have an intimate correlation to Chinese economic data. Just look at the chart. HAO started the year off well, but selling pressure has intensified in the past month as more glum Chinese data has crossed the wires. Of near-term concern is the fact that some of HAO's recent down days have come unusually large volume. An interest rate cut would be a boon for HAO, but the ETF really needs to stay above support at $21 in the coming weeks.

The chart for the Global X China Industrials ETF looks eerily similar to that of HAO. The Global X fund also started the year off in good shape, bumped into some round number resistance, failed a couple of times to crack said resistance and has been decimated in the past month by weak Chinese data points. The declines have taken CHII below its 50- and 200-day moving averages. Hey PBOC, rate cut please. Now. At least that's what CHII bulls might be thinking.

There are two schools of thought with the unheralded Market Vectors China ETF at the moment. First, it should be noted that the ETF is still in the green in the past month and that PEK has easily outperformed the iShares FTSE China 25 Index Fund

, indicating that the fund has benefited from tracking the CSI 300 Index. The other way of looking at things is that since PEK hasn't been caught in a sell-off in the past 30 days, it could be just a matter of time before traders get around to knocking the fund down a couple of pegs.

The iShares MSCI China Index Fund doesn't get much attention among China ETFs, but it does have over $391 million in assets under management. Home to almost 150 stocks, MCHI has dropped nearly 5% in the past month and trade almost quadruple its average daily volume on Wednesday. MCHI isn't highly levered to Chinese exporters and discretionary stocks, but we're not sure a 35% weight to financials is a good thing if China's hard landing gets even bumpier. If there is a bull case for MCHI and some other funds on this list, it could be valuations for their components. "Assuming China can grow as expected in 2012 and engineer a soft landing, Chinese equities look attractive from a valuation perspective," said Russ Koesterich of iShares. Referring to the Chinese equity market, Koesterich went on to say "It's now trading for less than 1.7x book value, a significant discount to where it has traded over the past five years and well below the emerging market average."