Gaw Capital eyes $1.5 bln for China property buys

* Plans to raise up to $1.5 bln for Chinese property

* To invest in mass-market residential housing

* Sees interest from U.S. investors, sovereign wealth funds

HONG KONG, Nov 20 - Private equity fund manager Gaw Capital Partners plans to raise up to $1.5 billion to buy property in China over the next two years to take advantage of a slump in prices.

Chairman and co-founder Goodwin Gaw said he wanted to launch a new fund soon but details have not been settled.

"2007 was a tough year, and we were very quiet, because the market was too hot," Gaw said in an interview at the MIPIM Asia conference in Hong Kong.

"As an opportunistic fund, we get active when times are bad."

Gaw Capital -- formerly called Gateway Capital -- runs two funds, the Gateway China Fund I and the Gateway Capital Real Estate Fund II, with a combined $1 billion of equity.

The first fund is completely invested and the second has put 70 percent of its money to work. Because of borrowing, the company has $4.7 billion in Chinese assets, spread across 14 projects.

After a steep climb, China's property market has slowed, with prices falling sharply in some cities, particularly in the south, as the global financial crisis compounded government efforts to cool prices.

Alarmed by the rapid turnaround, Beijing is now loosening its stance, and last month introduced some incentives for home buyers.

Gaw Capital's new fund will target retail properties in China's biggest cities, focusing on city-centre shopping malls and steering clear of big-box developments on city outskirts.

It will also develop middle-class and mass-market residential property in secondary cities.

"It is a sector that the government wants to encourage," Gaw said of mass housing. "You want to make sure the government's wind blows in the same direction as you."

Gaw Capital is drawing interest from large U.S. institutional investors and sovereign wealth funds, he said, because many believe China's housing market might recover faster than other markets.

Gaw said he aimed to buy land cheaply, as his funds did in 2005, before stepping aside when foreign investors were rushing into China from late 2006.

Although Gaw and his family have personal interests in hotels, including the Hollywood Roosevelt hotel in Los Angeles and in Myanmar, and Gaw Capital opened the boutique Hotel G in Beijing this year, hotels would not be a focus of the new fund.

Gaw said he liked secondary cities such as Chongqing, Dalian and Xuzhou. Chengdu was also particularly attractive, he said, because the government was pumping money into Sichuan province for rebuilding efforts after this year's earthquake.