* HSI seen at 26,000 at mid-2011; 27,500 by end-2011
* Sustained economy recovery, low interest rates eyed
* Chinese banks, commodities seen outperforming
By Jun Ebias and Donny Kwok
HONG KONG, Dec 8 (Reuters) - Hong Kong shares are expected to post modest gains in the first half of 2011, underpinned by sustained growth in the Chinese economy and the flood of cheap funds from developed markets, a Reuters poll showed.
The U.S. central bank's plan to stimulate the economy by buying more government debt up to the middle of 2011 and low rates will also lift demand for emerging market stocks, according to the 19 equity market strategists surveyed.
Hong Kong, having one of the freest capital markets in Asia, would likely see a glut of funds, they said.
The benchmark Hang Seng Index will likely finish 2011 up 19 percent from Wednesday's close of 23,092.52 at 26,000, the poll of around 20 analysts taken over the last week showed.
The index is seen gaining nearly 13 percent to 26,000 by the end of June next year.
The Asian Development Bank forecast the Chinese economy would expand 9.1 percent in 2011, slower than this year's 9.6 percent estimated growth, but still outperforming the rest of the world.
"The (local) market still lags behind other emerging markets such as India, and that will raise the risk appetite among investors in a market backed by the China growth story," said Linus Yip, a strategist from First Shanghai Securities.
The Hang Seng Index is up 5.6 percent so far in 2010. That compares with a 13 percent rise in India's main stock index and a near 50 percent surge in Indonesia.
CHINESE BANKS TO OUTPERFORM
Chinese banks could be among the best performers going into next year as rising central bank rates will boost their interest margins, said Marco Mak, a managing director at Haitong International Research Ltd.
Commodities counters may also gain on expectations of continued strong demand for oil, metals and other raw materials in China to fuel its economic growth, Mak added.
Shares of developers maybe under pressure after both China and Hong Kong adopted measures such as a limiting loans to property firms and a special stamp duty on transactions to discourage speculation and curb the fast rises in real estate prices.
"But an average 40 percent discount to NAV (net asset value) (among Chinese developers) will make the sector an exciting bet if favourable measures come out," said Yip, adding consumer and retail related issues will remain strong in the year ahead as income rises.
(Additional reporting by Christina Lo, additional polling by Bangalore Polling Unit; Editing by Jon Loades-Carter)