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Recent unrest in Europe and ongoing war in the Middle East could lead investors to seek diversification, potentially driving capital into Asian markets like Hong Kong and mainland China, according to a senior executive of Allianz Global Investors (AllianzGI). Julie Koo, head of distribution in Asia-Pacific for the company, explained that recent protests in France, Italy, and Spain may prompt investors to reassess their market exposure.

Koo stated that investors do not need to predict every event accurately, but rather use such unrest as an opportunity to review and adjust their allocations, and to consider how they can mitigate risks. In addition to European unrest and the US-Israel conflict with Iran, the US is also bracing for uncertainty surrounding the upcoming midterm elections, she added.

Koo emphasized that Asia, particularly Hong Kong and mainland China, is attractive to investors seeking diversification due to the region's strong economic growth and relatively low valuations. Stocks in Hong Kong and mainland China were trading below their long-term valuations as of the end of September, while US stocks had been overvalued, she explained.

Koo noted that Asian markets have a favorable position to attract capital inflows because they are currently underweighted. Consequently, investors and active asset managers are expected to increase their allocations in Hong Kong, mainland China, and other Asian markets, focusing on companies with robust earnings and growth prospects.

AllianzGI's Asia-Pacific distribution business has seen a 70% increase in assets under management over the past three years, Koo added. AllianzGI, part of the global insurer Allianz, highlighted Hong Kong's crucial role as a connector between mainland China and the rest of the world. The recently announced five-year plan by the Hong Kong government to transform the city into a wealth-management hub and technology center is expected to draw more investors, Koo said.

"Hong Kong is going to be really important as it is an ideal location for international investors to access Southeast Asia, North Asia, and mainland China," she concluded. "It is also the market the next generation of mainland Chinese clients will come to for wealth management."