Sergio Diaz
16-year-old Paraguayan striker Sergio Diaz (L) is a January target for Manchester United and LiverpoolGetty

Manchester United and Liverpool are reportedly set to go head-to-head for young Paraguayan striker Sergio Diaz.

According to Italian newspaper Tutto Mercato Web, the youngster who plays for Paraguayan club Cerro Porteno is considered to be one of the most highly-rated young forwards in the world.

The 16-year-old forward is currently in Uruguay with the Paraguay team, which is playing a South American U20 tournament and his performances this season have caught the eye of the English giants.

Diaz has made 20 appearances for his native club and has scored eight goals this season. This has prompted Liverpool and Manchester United to consider signing the youngster during the ongoing transfer window.

Brendan Rodgers and Louis van Gaal are known to have a keen eye for young players and both of them are not afraid to promote youngsters into the first-team set up.

The report claims that the Red Devils and Liverpool have already made contact with his representatives and could make a move during the ongoing January transfer window.

It is believed that the Paraguayan club values their star striker at about £5.2m, a fee that is affordable for both clubs. It will be up to the player to decide which club he wants to join if both clubs meet Cerro Porteno's valuation.

Meanwhile, United defender Chris Smalling has heaped praise on the club's first January signing Victor Valdes. The Englishman believes that the former Barcelona stopper is still at the top of his game and will be a very good addition to the Red Devils squad.

"He (Valdes) is someone that we all look up to through what he's achieved already in his career but you can see that he's nowhere near done yet," Smalling told United's official site.

"On the training field he's so sharp and you can see that he's very agile. He's such a great addition and is a name that really belongs here at Manchester United."

"We've heard a few stories from him and quite a few people here have asked him questions. Barcelona is another great club and you want to get some insight of what happens abroad as well," the England international explained.