Markets are anxiously anticipating Friday's release of China's GDP growth number for the first quarter of 2012. China is a key barometer for the health of the world economy. Its recent slowdown has many concerned about a potential hard landing and the negative impact on world markets. Currently, the consensus is that the reported GDP growth rate will be 8.4%, the lowest number from China since the Lehman debacle.
With markets ready to react to China's GDP number, here are six unique ETF options to play a strong or weak announcement on Friday.
ETFs For A Strong China GDP Number
WisdomTree Commodity Currency ETF (CCX) - Countries with strong reserves in commodities stand to benefit if the Chinese economy avoids a hard landing. CCX avoids the traditional equity play and instead focuses on the lower correlated asset class of currencies. Here's the country breakdown of CCX as of April 11th.
Guggenheim China Small Cap ETF (HAO) - Predictably small cap Chinese stocks have experienced more volatility on the downside and upside than larger cap issues. A GDP number that excites markets should boost HAO further than the traditional ETF most investors access China with, iShares FXI. Here's a three month chart from Yahoo Finance comparing the two ETFs' price movement.
United States Copper Index Fund (CPER) - Dr. Copper, like China, is used as a barometer of worldwide economic health. A solid Chinese GDP number will provide a measure of confidence for copper demand, especially given the recent concerns about the construction and housing market in China.
ETFs For A Weak China GDP Number
ProShares Ultra Short Gold ETF (GLL) - A weak China GDP number should hurt gold, in a similar way the recent EU debt crisis pulled gold downward. Why? Risk off becomes the mandate and that has meant a strengthening of the U.S. Dollar. Gold, primarily denominated in U.S. Dollars, immediately loses value in that scenario. In addition don't forget China is the world's third largest consumer of gold. Weaker GDP growth in China will impact gold demand and thus prices. GLL allows investors to take a 2X bear position on a daily basis and it is the most aggressive ETF in this list.
PowerShares DB U.S. Dollar Index Bullish Fund (UUP) - As mentioned before, a letdown from China will push investors into the relative safety of the U.S. Dollar. UUP should benefit from that trend. Here's a six month chart of UUP. Note the spike in UUP in the fall of 2011 (November) as the EU debt crisis pushed investors into a risk off mentality until the beginning of 2012.
PIMCO Enhanced Short Maturity ETF (MINT) - MINT offers a way for investors to enter a cash like position but still receive a measure of income. The 30 Day SEC yield on MINT is a respectable .93%. This combo of cash like safety and above average income should be even more compelling if China disappoints.
Markets Already Moving On China GDP News
Already today two data points related to China's GDP growth impacted markets. First, as reported by CNBC, a rumor surfaced that China would surprise the markets with a 9% GDP growth rate. Consequently risk assets surged. Secondly the World Bank released their quarterly outlook on China's GDP growth rate, which predicts an 8.2% growth rate in 2012 followed by a rise to 8.6% in 2013. China's GDP grew 9.2% in 2011, so both estimates incorporate a slowdown but not a hard landing.
Certainly there are many ETFs to position for the China GDP number announcement. I've highlighted just a few that I believe are especially attractive given each scenario. No matter what happens on Friday however one thing is for certain, China's emergence as a leader and driver of the global economy will be further cemented.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.