An asset manager believes that China's "extreme valuations" present an opportunity for successful stock selection.

• Pzena Investment Management sees increasing opportunity in China and Japan.
• In the past two years, the investment firm has increased its holdings in Chinese stocks.
• Despite some political uncertainty, Japan has remained popular among global funds this year.

Upping your exposure to Chinese stocks is worth the risk.

According to Caroline Cai, CEO of U.S.-based Pzena Investment Management, it is the first time in the past seven to eight years that investors are being paid to expose themselves to China.

Cai views the opportunities in China as exciting, as the investment firm has increased its exposure to Chinese equities in the past two years.

"We are not optimistic about the long-term Chinese macro, but we are drawn to the extreme undervaluation in China, where people are willing to pay any price for investment opportunities," she stated.

If the risk is evident to all, at least you're compensated for accepting some exposure, she remarked.

Adam Coons of Winthrop Capital Management has stated that he is taking a more cautious approach and waiting "a little bit longer" before re-entering the Chinese market, as he is concerned about a possible short-term reversal in the stock market.

The People's Bank of China announced in September measures to support the Chinese economy, including reducing the amount of cash banks are required to hold.

In a few days, China's top leaders announced their intention to stop the decline in the property sector and encourage a recovery.

China recently declared a five-year plan worth 10 trillion yuan ($1.4 trillion) to address local government debt issues, indicating further economic assistance will be provided next year.

The CSI 300 index has increased by 20% year-to-date due to the rise in Chinese stocks since late September, which were fueled by promises and announcements of stimulus.

Japan

Despite monetary and political uncertainty, Japan has remained a popular destination for global funds this year. Despite his ruling Liberal Democratic Party (LDP) suffering its worst election loss in more than a decade last month, Prime Minister Shigeru Ishiba was re-elected on Monday.

Cai is more interested in the "small-cap end" compared to Pzena's limited exposure to larger firms like banks.

"She stated that the valuations of large-caps are not justified by their underlying fundamentals," I said.

Cai stated that although Japanese banks have lower return on equity (ROEs) compared to European banks, they are traded at higher multiples.

She considered the possibility that Japanese interest rates could rise 50-100 basis points and factored it into her assessment that "a lot of what can go right has already been priced in."

"In contrast, the impact of changes in corporate governance and the domestic economy on small cap Japanese companies may have the most significant effect on their long-term outcomes."

—CNBC's Sophie Kiderlin and Evelyn Cheng contributed to this article.