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Ruchir Sharma, head of emerging markets at Morgan Stanley, said Tuesday that the impact of China's economic slowdown will be felt more in U.S. financial markets, rather than in the U.S. economy.

"I think the economic impact in the U.S. is likely to be much more limited than any other region in the world," he told CNBC's "Power Lunch." "But I think the earnings impact might be much more than what people think."

Sharma said that a stronger dollar will hit companies that export their goods— about one-third of U.S. stock market earnings come from international and emerging markets, he said.

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But more alarming, said Sharma, are indications of an impending global recession—with the source in China. "I think we already have some signposts that the global economy is pretty much close to a recession and we are one shock away from the global economy entering its sixth global recession in postwar history."

Sharma, who is also the author of "Breakout Nations," recommended bright spots in Eastern Europe and South Asia as investment opportunities. He told investors to look for countries that will benefit from lower commodity prices over the next few years.

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Dan Veru, CIO of Palisade Capital Management, said that not only is the Chinese economy troublesome, but so are Beijing's currency devaluations.

"That is going to set off a string of currency devaluations throughout the emerging markets and the rest of Asia. So far that has not happened, but that is a risk," he told CNBC's "Power Lunch" on Tuesday.