Is Morgan Stanley China A Share Fund (CAF) Oversold?

As I indicated earlier, Morgan Stanley China A Share Fund (CAF) runs at a beta fluctuating above or below 1 to Shanghai Composite Index (SSEC).   Since Dec 28th, 2010, that beta has changed from around 1 level to under 1 level, mainly caused by a year-end dividend of $4+ per share.  

From the chart above, the share price has dropped significantly faster than Shanghai Index even taking into account the 2009 year end dividend.  This performance is similar to the performance in late 2007 and early 2008 time-frame when Shanghai Index was dropping fast from its Oct-07 top level.

Although mid-2008's rally turned out to be a sucker-rally for the fund,  right now, the fund's price level is so low (close to Mar-09 level) that down-side risk is limited, while up-side potential is unlimited.

Top 25 Holdings as of 1/30/2010		Sector	Country	% Net Assets
	Shanxi Xishan Coal And Electricity Power Co.,ltd.		China	6.65
	Ping An Insurance (group) Company Of China, Ltd.		China	5.82
	Citic Securities Company Limited		China	5.56
	Bank Of Beijing Co., Ltd.		China	4.26
	Zhengzhouyutongbusco.,ltd.		China	3.81
	Anhui Conch Cement Company Limited		China	3.56
	Bank Of Communications Co., Ltd.		China	3.51
	China Merchants Property Development Co.,ltd.		China	3.48
	Gree Electric Appliances,inc.of Zhuhai		China	3.28
	Changsha Zoomlion Heavy Industry Science And Technology Development Co.,ltd		China	3.16
	Poly Real Estate Group Co.,ltd.		China	3.15
	iShares FTSE/Xinhua A50 China Trkr (ETF)	---	Hong Kong	3.10
	Gemdale Corporation Cl A		China	3.00
	PINGDINGSHAN TIANAN COAL MINING CO LTD		China	3.00
	China Merchants Bank Co.,limited		China	2.41
	Sany Heavy Industry Co.,ltd.		China	2.40
	Angang Steel Companylimited		China	2.11
	Huayu Automotive Systems Company Ltd		China	2.03
	Beijing Wangfujing Department Store (group)co.,ltd.		China	1.97
	China Construction Bank Corporation		China	1.88
	Lingyuan Iron & Steel Co.,ltd.		China	1.88
	China Dongxiang (Group) Co., Ltd.		China	1.82
	China South Locomotive And Rolling Stock Corporation Limited		China	1.79
	Bank Of Nanjing Co.,ltd.		China	1.62
	Huadian Power International Corporation Limited		China	1.58

CAF's expense ratio is 1.75%. CAF details on MorningStar.com