(Corrects closing tin price down 0.2 percent, not up)
* China foreign direct investment falls
* LME nickel stocks rise to another record
* Zinc in deficit of 234,000 T in H1
By Susan Thomas and Eric Onstad
LONDON, Aug 18 (Reuters) - London copper edged higher on Monday as some investors regarded recent losses as overdone, but gains were capped after new home prices in top metal consumer China fell in July for the third month in a row.
Three-month copper on the London Metal Exchange closed up 0.5 percent at $6,905 a tonne, rebounding from losses of up to 5 percent this month. The price fell by 1.8 percent last week alone, touching $6,821 on Thursday, its lowest since June 23.
ANZ strategist Daniel Hynes in Sydney viewed copper as oversold and said that prices got to "relatively attractive levels".
"In our view, fundamentals are improving, which opens up the scenario of upside surprise...," he added.
Investors are still jittery about developments in China, however. Prices were weighed down by news on Monday that price falls in new housing also spread to a record number of Chinese cities including Beijing, underlining a worsening property downturn that is increasingly dragging on the broader economy.
China accounts for more than 40 percent of demand for copper, which is widely used in electrical wiring and plumbing in construction.
"Base metals are under pressure this morning, although flows have been relatively light," Vicky Sanders, head of analytics sales at Marex Spectron in London, said in a research note issued earlier in the day.
"Overnight the National Bureau of Statistics announced that new home prices fell in 64 out of 70 cities in China last month, the most since January 2011."
Foreign direct investment in China also unexpectedly fell for the first time in 17 months compared with the same period a year earlier, as firms from Japan, Europe and the United States cut spending in the manufacturing sector.
A recovery in copper prices that began in mid-March fizzled out as mines ramp up shipments and supplies swell. Suspected metals fraud in China has also curtailed traders' ability to get credit as banks have clamped down on risky lending practices, curbing demand for the metal.
Hedge funds and money managers slashed their bullish bets on copper futures and options last week, the Commodity Futures Trading Commission said on Friday, as concerns resurfaced over the strength of global economic growth.
NICKEL STOCKS HIT ANOTHER RECORD
Nickel prices fell after inventories continued to rise. Data showed inventories at LME warehouses rose by 2,256 tonnes to a record high 324,984 tonnes, highlighting an overhang of supply.
Investors are counting on shortages developing after Indonesia cut off unprocessed nickel ore exports in January, but a legacy of past overproduction means that plentiful stocks will have to be worked off first.
LME nickel, the best performing base metal so far this year with gains of 34 percent, slipped 0.8 percent to close at $18,495 a tonne.
Zinc rose after data showed that the metal mainly used for galvanising steel was in a deficit of 234,000 tonnes in January to June.
Zinc finished 0.4 percent higher at $2,282 a tonne.
Zinc's sister metal lead edged up 0.1 percent to close at $2,216 per tonne after data showed the market was in a deficit of 23,000 tonnes in the first half.
Aluminium failed to trade in closing open outcry activity and was last bid up 0.9 percent at $2,018 a tonne, while tin fell 0.2 percent to finish at $22,425 a tonne.
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
Three month LME tin (Additional reporting by Melanie Burton in SYDNEY, editing by Jane Baird and Keiron Henderson)