* Copper could hit $4,500-$4,200 as emerging economies struggle -UBS
* China flash PMI hits 6-1/2 yr low in Sept
* Zinc rallies 2 pct as lead/zinc ratio play is unwound (Adds comment, detail, updates prices)
By Melanie Burton
MELBOURNE, Sept 23 (Reuters) - London copper bounced back from near four-week lows on Wednesday as short holders took profits, but further downside was expected after a survey revealed worsening factory activity in China.
The survey showed factory activity unexpectedly shrank to a 6-1/2-year low in September, raising fears of a sharper slowdown in China’s economy and more angst for financial markets.
“The macro picture is not rosy. The latest figures show that things are quite bleak in upstream industries and the property area,” said Dominic Schnider of UBS Wealth Management in Hong Kong.
Three-month copper on the London Metal Exchange climbed by 0.5 percent to $5,104.50 a tonne by 0740 GMT after falling 3.6 percent in the previous session, which was its biggest one-day slide in more than two months.
“It’s a bit of profit taking, coupled with some CTA short-covering. They have been trimming shorts for a week or two now,” said a London based trader, adding traders were still nervy on near term direction and it was unclear if a floor had formed.
Copper fell to $5,036 on Tuesday which was its weakest since Aug. 27. It hit a six-year trough of $4,855 last month.
“I would look at $4,500-$4,200 for copper as the market realizes that growth, predominantly in emerging markets, continues to slow,” Schnider said.
Shanghai Futures Exchange tumbled more than 4 percent in overnight trade before finding footing at 38,930 yuan ($6,100) a tonne, down 3.1 percent.
China’s factory activity has now shrunk for seven months in a row, and the latest survey showed conditions in September deteriorated from August by almost every measure, with companies cutting output, prices and jobs at a faster pace as orders fell.
The worrying outlook was reflected in equities markets, with shares down more than 2 percent in Shanghai.
Chinese President Xi Jinping said that his government will speed up efforts to build an open economy and will not go back on the reform process.
Dollar strength on expectations that U.S. interest rates will soon rise has added to the headwinds faced by commodities.
The U.S. Federal Reserve likely will pull the trigger and hike interest rates in December after taking a pass last week, according to economists polled by Reuters who assigned a 60 percent probability of it happening.
In other metals LME zinc rallied 2 percent to $1661, eroding steep losses seen since last week on bets global inventories would rise as producer Glencore sold down its stock.
Traders were taking profit from a zinc-lead switch trade, buying back zinc they had sold and selling lead, a Singapore-based trader said.
In news, the LME is launching an electronic system to better track material stored outside its exchange warehouses in response to a financing fraud in China that roiled banks and trading, an executive said on Tuesday.
Three month LME copper
Most active ShFE copper
Three month LME aluminium
Most active ShFE aluminium
Three month LME zinc
Most active ShFE zinc
Three month LME lead
Most active ShFE lead
Three month LME nickel
Most active ShFE nickel
Three month LME tin
Most active ShFE tin
$1 = 6.3821 Chinese yuan renminbi Reporting by Melanie Burton; Editing by Simon Cameron-Moore and Anand Basu