Copper, the base metal whose price movements reflect industrial activity, has gained over 12% in a week. The bounce in prices has been linked to falling inventories and (once again) growing hopes for a new stimulus package in China.

Copper stocks in LME warehouses fell 4850 metric tons to just over 526,000 tons, notching up a fall of more than 22,000 tons since February 25, and seemingly reversing a trend in which inventories had doubled since October last year.

Furthermore, the number of cancelled warrants – metal earmarked for delivery – jumped nearly 10,000 metric tons overnight to 64,400 tons and implied more inventory declines were on the horizon.

Copper investors were also encouraged by reports of possible measures by Chinese authorities to prevent a higher pace of declining growth, as experienced in the last few quarters. There are mounting expectations that China is expected to announce another stimulus package in the country’s annual legislative meeting due to start today. Also, the Chinese Investment Corporation (NASDAQ: CIIC) is likely to invest $22 billion in miners and producers of commodities like copper in order to soften the adverse effect of a steep plunge in these commodity prices.

“This however does not change the fundamental backdrop which points towards a tame scenario for prices in coming quarters. While higher volatility due to hedge fund activities cannot be ruled out, the underlying trend for industrial commodities is still bearish,” said Praveen Singh, research analyst at Sharekhan Commodities.

Source: Base Metals Break Out

About four months ago, China’s sovereign wealth fund, China Investment Corp. (CIC), announced it would up the amount of money it pours into foreign investments by 30%. Now, CIC has about $90 billion to spend on assets abroad.

CIC has some complex dealings with internal state-owned banks, like the Agricultural Bank of China and China’s Development Bank. Not surprising, since on of CIC’s major funtions is to provide financial stability for China’s state-owned banks.

Near the end of last week, China’s Development Bank (CDB) signed a $100 million loan contract with Banco de Chile (NYSE:BCH).

BCH is Chile’s second largest bank. It has signed an agreement to open joint credit lines with CDB. According to the press release, CBD wants to invest in Chile’s “ports, bioceanic corridors and junior mining companies.

Chile is a major producer of copper, which is of great import to China. In fact, China’s capital investment in infrastructure like roads, factories, and property climbed 27.3% in the first half of 2008. That’s more than was expected, and this continued growth is sure to keep demand high for industrial metals like copper.

This should come as no surprise to any of you who have been keeping up with the sovereign wealth fund story. Barely a month ago, Kuwait announced it would boost investments in stocks, bonds and real estate in China, India and Japan.

But I did find one interesting story…

Turns out emerging markets are investing in developed nations, too. You already know about Asian and Middle Eastern funds picking up stakes in U.S. financial institutions…

What was surprising to me was that an Egyptian bank pumped $5.97 million into the UK’s Panmure Gordon, a British stockbroker and investment bank. EFG-Hermes (CAI:HRHO) is Egypt’s largest investment bank, and this $6 million investment gets it a 9.97% stake in Panmure Gordon (LON:PMR).

This stake will create more opportunities and access for each company’s clients. As London has become a financial capital of the world, with a number of Middle Eastern ties, this move makes perfects sense for both parties.

Source: Emerging Markets Invest in Emerging Markets