Citi's top picks for Asia markets are China and Japan.

• According to Ken Peng of Citi Private Bank, Citi recently increased its asset allocation to Japan and China, making them the bank's top picks for the region.
• Japanese stocks are gaining more interest from global investors due to enhancements in corporate governance, and the country continues to be a vital component of the global technology supply chain, according to Peng.

According to a Citi Private Bank investment strategist, Japan and China are the top picks in Asian markets, which are better positioned compared to the U.S.

While inflation is milder in Asia compared to the U.S., central bankers in the region are not as nervous as the Federal Reserve, according to Ken Peng, head of the bank's Asia Investment Strategy.

Peng announced on Friday that Citi has recently increased its asset allocation to Japan and China, according to a report on CNBC's "Street Signs Asia."

Our top picks for the region are these two, he stated.

Peng stated that Japan is currently the "least expensive among developed markets" and is also below its own historical norms.

According to him, earnings growth in Japan is "fairly robust," and price-to-earnings ratios are decreasing due to a decline in prices and an increase in earnings.

A weaker yen could benefit Japan's exports, as it would make their products cheaper and more competitive in the global market.

Japanese stocks are gaining more interest from global investors due to enhancements in corporate governance, and the country continues to be a vital component of the global technology supply chain, according to Peng.

As the U.S. becomes less stable, there will likely be an increase in inflows to Japan due to its collection of interesting points, making us more positive about its future.

Peng stated that China is likely to experience relaxation in both monetary and fiscal policies.

While the Federal Reserve is preparing to increase interest rates, signaling the end of the easy money era, China has recently reduced interest rates in an effort to stimulate its economy.

Peng stated that on the Chinese side, there is potential for policies to be expanded enough to narrow the credit spread.

As interest rates in China decrease, bond prices increase. Meanwhile, as interest rates in the U.S. rise, bond prices fall, providing chances for China to outperform.

He stated that he anticipates China to be a high yield fixed income space alpha opportunity this year.