Company: CAF
Filing Date: 2025-03-06
Form Type: N-CSR
Source: 0001104659-25-021323
Chunk: 2

Company: Morgan Stanley China A Share Fund, Inc.
Filing Date: 2025-03-06
Form: N-CSR
Chunk 2
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, a cosmetics company, a pharmaceutical company and a packaged food manufacturer. The health care sector was the worst performing sector for the period over concerns about U.S. biosecurity legislation and disappointing company profit results. Consumer stocks continued to underperform as China's domestic consumption recovery remained weak over the period.

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Morgan Stanley China A Share Fund, Inc.

December 31, 2024

Letter to Stockholders (unaudited) (cont'd)

Management Strategies

• As of the end of the reporting period, we believe the sustainability of the market rebound at the end of 2024 depended on the implementation and effectiveness of the policies in turning around the economy and corporate fundamentals. We believe it is unlikely the policy stimulus announcements made in 2024 could lead to a marked improvement in the economy's underlying fundamentals given the level of debt in the system. Recent announcements made toward year-end 2024, including that of special bond issuances, are a positive step, in our view, but only cover a portion of the estimated total local government debt. Given the prolonged adjustment in China's property market, we believe it may take more effort and time to turn around the economy. We will continue to closely monitor the policy implementation and economic development in the coming months to gauge the pace of economic recovery. The market needs to watch out for details of other follow-up fiscal policies, which are key to boosting demand and growth, especially given the backdrop of the incoming U.S. administration.

• At period-end, we believe the portfolio has a balanced sector allocation, with a relatively defensive tilt given the challenging macro backdrop facing the Chinese economy. We believe the Fund can potentially outperform the market under the current environment as we position the portfolio in what we believe are high quality companies with a stable fundamental outlook and undemanding valuation.

• The Fund has remained focused on long-term fundamentals, and we continue to seek structural growth opportunities in China. Meanwhile, we have also added quality companies with steady growth and attractive valuations or dividend yields amid the soft economic backdrop. In the near term, we are positioned with a defensive tilt in view of the macro headwinds.

• Against the macro backdrop of slower growth and lower interest rates in China, we believe high quality companies with resilient growth and sustainable total capital returns are likely to outperform the broader market. As such, we believe the Fund's bottom-up stock selection is important to generate outperformance relative to the Index. We look for companies with structural growth, competitive advantages, strong