* Canada's S&P/TSX index seen at 14,500 end-2011
* Index expected at 13,600 by mid year
* Fundamentals solid but global risks mount
By Claire Sibonney
TORONTO, March 24 (Reuters) - Canada's main stock index is expected rise a bit more this year, posting high single-digit returns due to a strong domestic economy and underpinned by a continuing recovery in the United States, a Reuters poll found.
The results foretell a more modest outcome, however, compared to more dramatic double-digit gains over the last two years as the market struggles to cope with global risks, from growing unrest in the Middle East to a nuclear crisis in Japan.
The Toronto Stock Exchange's S&P/TSX composite index, which has risen about 5 percent this year, was seen ending 2011 another 3 percent higher at 14,500, according to the median forecast of 33 analysts and fund managers in a poll taken over the past week.
That was roughly 4 percent higher than the median end-2011 target of 14,000 in the December poll and would make for an 8 percent full-year gain. But that is eclipsed by the 14 percent advance for the TSX in 2010, and 31 percent in 2009.
Many analysts point to support from the fundamental factors that pushed the TSX to near three-year highs earlier this month, including rallying commodity prices and domestic earnings.
"We do see global growth improving in 2011 and that tends to mean earnings are growing, which of course pushes the market higher," said Kate Warne, Canadian market strategist at Edward Jones in St. Louis, Missouri.
"The gains should be broad-based due to improving growth in Canada and the rest of the world."
Economic reports are encouraging, including recent data that has showed the pace of job creation in the United States accelerating. Jobs growth in Canada has started the first quarter of the year with considerable momentum.
MID-YEAR BLUES
The median call on the TSX for mid-2011 was 13,600 -- slightly weaker than the 13,750 consensus forecast in the December poll.
Estimates for the index heading into the middle of this year ranged from 12,200 to 15,000 -- reflecting a fair amount of uncertainty and volatility to come. For the year-end projection, the range was 12,100 to 16,200.
"Apart from acknowledged risks such as (global) sovereign debt and an engineered slowdown in China, we also have to contend with an escalation in geopolitical risk emanating from the Middle East, as well as the long-term consequences of the earthquake and tsunami-related nuclear disaster in Japan," said Elvis Picardo, an analyst and strategist at Global Securities in Vancouver.
In this environment, he said the TSX's huge weighting in commodities could hurt the market, as triple-digit crude oil prices may hinder rather than boost the index this year.
"Investors are now taking a more realistic view of the market's prospects, as opposed to the euphoria that prevailed from September to February," added Picardo.
Another headwind that respondents said the market will have to battle is the anticipation of the U.S. Federal Reserve's massive quantitative easing program ending in June.
But technical signals for the TSX are still bullish, said Sid Mokhtari, market technician and director of institutional equity research at CIBC World Markets, noting that over 70 percent of stocks on the index were trending above the 200-day moving average.
(Additional reporting by Solarina Ho, additional polling by Bangalore Polling Unit; Editing by Jon Loades-Carter)