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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Welcome to the Daybreak Asia podcast. I'm Doug Chrisner. In

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Speaker 2: the States, risk assets were sold down, with big cap

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Speaker 2: tech and cryptocurrencies bearing the brunt of the selling.

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Speaker 3: Now.

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Speaker 2: That drop came after a number of Wall Street executives

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Speaker 2: warned of a pullback in the equity market. At the

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Speaker 2: same time, the hedge fund manager Michael Burry placed a

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Speaker 2: one point one billion dollar bet against leading artificial intelligence

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Speaker 2: related stocks. For more on the market action, we caught

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Speaker 2: up with Anna Wou. She is cross asset investment specialist

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Speaker 2: at Vanek who spoke with Bloomberg TV host April Hong

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Speaker 2: and shry On and I.

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Speaker 1: Great to have you with us as we get the

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Speaker 1: Asian session started. We have already seen significant pressure over

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Speaker 1: in South Korea, for example, because of the Career Exchange

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Speaker 1: warning about s k Heinix, because of that incredible AI rolly.

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Speaker 1: Where are we in Asia when it comes to these

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Speaker 1: valuations of these high flying tech stocks.

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Speaker 3: Hello from Sydney and good to see you. I think

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Speaker 3: very much to your point. We had a five month

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Speaker 3: rally in AI thematic in the US and cross the board,

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Speaker 3: so the bar is simply just getting higher. So now

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Speaker 3: a modest earning speed does not translate into price reaction anymore.

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Speaker 3: To that point, the similar sentiment, I guess it's flowing

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Speaker 3: into the Asia market as well. After such a rally

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Speaker 3: that we have seen in South Korea, China, arguably in Japan,

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Speaker 3: I think that bar right now is getting higher as well. However,

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Speaker 3: I want to bring your attention to the valuation landscape.

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Speaker 3: Right even after the broader rally in Asia tech that

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Speaker 3: we have seen so far, it's still valued much lower

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Speaker 3: than the US tech and which makes it really a

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Speaker 3: value and a growth play in the long term. And

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Speaker 3: if we look at the EPs growth, it's not great,

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Speaker 3: but it's improving sectors sector for the sector quarters after quarter.

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Speaker 3: So I think the long term story for this sector

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Speaker 3: in Asia is still constructive.

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Speaker 1: One of all, not necessarily the direct the AI please,

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Speaker 1: but the indirect ones because we know that in order

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Speaker 1: to power artificial intelligence will need the energy for example.

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Speaker 1: That that's a great question.

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Speaker 3: I really love that because exactly the global AI industry

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Speaker 3: is maturing over the last couple of years, so it's

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Speaker 3: gone from you know, this idea generation phase who has

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Speaker 3: the best model really to an operational intelligence phase where

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Speaker 3: we need to see actual monetization an operational AI ecosystem.

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Speaker 3: And in that sense, the supplementary roles into the AI

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Speaker 3: rally right now are benefiting and also positioned to benefit

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Speaker 3: in the coming quarters as the margin expansion goes in.

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Speaker 3: To your point, energy play is one of the one

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Speaker 3: of the pockets of opportunities that's getting a lot more

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Speaker 3: attention compared to the previous quarters because AI after the

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Speaker 3: record amount of AI capex energy and electricity demand in specific,

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Speaker 3: it's rallying two decade high and it's positioned to go

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Speaker 3: ten x in by twenty thirty. So that demand gap

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Speaker 3: needs all sorts of energy play. So you know, one

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Speaker 3: of the more prominent play right now is the nuclear

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Speaker 3: It gives twenty four to seven clean non emission play

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Speaker 3: from that part and benefiting the uranium minus as well,

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Speaker 3: and to a certain extent, the renewable other renewable energy

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Speaker 3: sources companies have been growing very fast in the second

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Speaker 3: half of the year. Also look at the valuation side

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Speaker 3: as well, and pointing to that growth and value play,

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Speaker 3: they are very attractively valued comparing to the other pockets

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Speaker 3: of AI.

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Speaker 4: With that in mind, which market do you think will

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Speaker 4: lead the way for the rest of US year and

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Speaker 4: into the first quarter of next year. Is it still

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Speaker 4: going to be perhaps South Korea for the region, especially

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Speaker 4: given how we're seeing a resurgent dollar.

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Speaker 3: Yeah, okay. I think that question really goes into two parts.

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Speaker 3: I think in terms of markets that is positioned well

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Speaker 3: towards the end of the year to next year, Korea

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Speaker 3: is one of the more high conviction market because it's

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Speaker 3: got the cleanest growth play right now and also translating

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Speaker 3: into the latest earning season while it's still quite early days,

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Speaker 3: but we can still see that over half of the

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Speaker 3: companies are reporting surprising to the upside. Also, it's got

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Speaker 3: two cleanest play in terms of growth. One is AI.

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Speaker 3: It's strategic position in the high member chip specialist role

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Speaker 3: in in the global AI supply chain is giving it

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Speaker 3: a long term tailwind and long term contracts as well

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Speaker 3: with margin expansion possibilities. But also it has a very

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Speaker 3: unique role in the global defense sector and also that

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Speaker 3: has an AI play to it as well. So these

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Speaker 3: two catalysts, I guess is driving the career market to

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Speaker 3: a broader growth play. Outside of that, I think China,

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Speaker 3: even though right now the the rally has stoled a

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Speaker 3: little bit, and I think investors are waiting for a

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Speaker 3: more pronounced and substantial policy stimulus to to you know,

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Speaker 3: pick on that rally again. And but also AI sector

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Speaker 3: in that country can still defy gravity as the broader

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Speaker 3: I guess hardware makers rally and race to to to

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Speaker 3: fight for the role for China's the domestic Navidia.

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Speaker 2: That was ANAWU Cross Asset investment specialist at Vanek speaking

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Speaker 2: to Bloomberg TV host April Hong and shrry On here

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Speaker 2: on the Daybreak Asia podcast. Welcome back to the Daybreak

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Speaker 2: Asia Podcast. I'm Doug Chrisner. Economies across Asia are being

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Speaker 2: reshaped by a new reality or realities plural. We've got

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Speaker 2: higher US tariffs, softer Chinese demand, and the growing impact

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Speaker 2: of artificial intelligence. And in the midst of it all,

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Speaker 2: money moving faster and more securely across borders. Joining me

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Speaker 2: now for a closer look is Sandeep Mahultra. He is

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Speaker 2: Executive VP of Core Payments for the Asia Pacific at MasterCard. Sandeep,

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Speaker 2: thank you so much for making time to chat with

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Speaker 2: me lately. I think we can agree on this much.

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Speaker 2: There has been a tremendous amount of focus on the

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Speaker 2: use of artificial intelligence. Give me a sense right now

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Speaker 2: best you can on how MasterCard is using AI, especially

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Speaker 2: in the APEC region.

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Speaker 5: Yeah, well, first of all, thank you for having me on.

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Speaker 5: And you know AI is the is the tok of

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Speaker 5: the town.

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Speaker 6: So if you look at MasterCard, you know our big

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Speaker 6: focus used to be converting cash to digital and then

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Speaker 6: over the last you know, one year or so, we

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Speaker 6: are actually taking this to the next level, so taking

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Speaker 6: digital to intelligent and this is where AI plays a

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Speaker 6: big role, where we are looking at intelligent transactions just

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Speaker 6: not digital, and we are actually changing our network to

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Speaker 6: be ready for this connected commerce, which is our vision

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Speaker 6: for twenty.

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Speaker 5: Thirty driven by AI. So what is AI going to do?

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Speaker 6: We want to make sure that consumers, when they do

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Speaker 6: discovery of the products or search the products on an

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Speaker 6: AI agent, are able to even do a purchase or

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Speaker 6: that without leaving that agent. Sounds very simple, but behind

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Speaker 6: the scenes, it's very complex.

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Speaker 3: Right.

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Speaker 6: What happens if you ordered green pair of socks and

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Speaker 6: red rive, who takes care of that? What happens if

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Speaker 6: a fraudulent transaction happens? How do you take care of that.

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Speaker 6: So what we are trying to ensure is that we're

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Speaker 6: trying to create a very safe, secure, and a transparent

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Speaker 6: kind of an environment for these agents to perform the transaction.

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Speaker 2: I'm wondering now on the degree to which you are

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Speaker 2: collaborating with other software developers over or whether this is

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Speaker 2: primarily something that is proprietary to the extent that you

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Speaker 2: need to employ a number of software engineers to help

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Speaker 2: facilitate this goal. What's the balance between collaboration and kind

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Speaker 2: of going alone in house.

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Speaker 5: It's all collaborative, it's all partnership.

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Speaker 6: It's all based on standards because you cannot anything propriety

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Speaker 6: because it won't scale. And if it doesn't scale, it

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Speaker 6: doesn't matter. So what we're trying to do is we're

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Speaker 6: working with the fidos of the world, which is the

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Speaker 6: standard community. We're working with cloud Flare and I'll tell

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Speaker 6: you what that does. We're working with PayPal, We're working

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Speaker 6: with many other partners to make sure that the transaction

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Speaker 6: happens in a safe, secure fashion.

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Speaker 4: You know.

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Speaker 6: One example is you want to make sure that when

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Speaker 6: the merchant accept a transaction, that agent is a good agent.

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Speaker 5: How do you do that?

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Speaker 6: And that's where cloud Flare club comes into picture, which

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Speaker 6: basically will block unit agent which is not a good agent,

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Speaker 6: and that provides, you know, comfort to the merchant who's

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Speaker 6: accepting those transactions.

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Speaker 2: So in the last two week here in the States,

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Speaker 2: we heard from a number of those big hyper scalers

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Speaker 2: on their AI caps spend. And I'm curious about the

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Speaker 2: degree to which you feel, maybe not you personally, but

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Speaker 2: MasterCard as a company feels compelled to lay out vast

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Speaker 2: sums of money in the capex realm in order to

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Speaker 2: be ready for this kind of change that you're describing.

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Speaker 6: Look, I think the hyperskillers are doing what they are

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Speaker 6: best in in terms of creating models, in terms of

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Speaker 6: providing the computing data to make sure that that is done.

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Speaker 6: What we are doing is we are basically saying, if

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Speaker 6: you search using that data to find an item you like,

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Speaker 6: we will make sure that that transaction which is done

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Speaker 6: within that AI interface, whether it's an agent, whether it's

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Speaker 6: some other protocol which the consumer is using, or if

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Speaker 6: the merchant has made a change, we will make that

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Speaker 6: commerce become safe, secure and intelligent and give comfort to

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Speaker 6: the consumer without leaving that agent, you know, domain.

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Speaker 2: San Deepe I'm curious as to whether there are certain

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Speaker 2: areas of the digital payment space that you're particularly concerned about,

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Speaker 2: perhaps something that you have to almost counter program again

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Speaker 2: anst whether there is a level of risk for your

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Speaker 2: business or the businesses of your customers. What are the

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Speaker 2: areas most concerning to you?

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Speaker 6: It is it is a big concern that if you

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Speaker 6: look at just Asia loan Asia lost about close to

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Speaker 6: six and seventy billion dollars of money due to fraud

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Speaker 6: in thus last year. So sixty percent of the banks

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Speaker 6: are brightticing AI driven fraud prevention and identity verification. So

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Speaker 6: that's a big focus for us. How we're going to

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Speaker 6: do that is we want to make sure that the

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Speaker 6: card numbers which you have don't exist anymore. So, whether

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Speaker 6: you save a card on file at Macy's dot Com,

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Speaker 6: we're going to replace it with a token, whether you

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Speaker 6: basically have a Apple Pay transaction that replaced by a

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Speaker 6: token even today.

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Speaker 5: And then even the.

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Speaker 6: Cards which are on the physical card, the card numbers,

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Speaker 6: we're going to make them numberless as well. So the

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Speaker 6: big focus is make that tokenized. No more card numbers

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Speaker 6: anywhere on the planet, and that's our goal for twenty

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Speaker 6: thirty and we must verify the user. We will make

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Speaker 6: sure that you are who you are for every transaction.

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Speaker 6: So fraud is the risk. But this tokenization and authentication,

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Speaker 6: which is verifying every user for every transaction, that's the

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Speaker 6: next step which we are moving towards and made a

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Speaker 6: big progress around that.

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Speaker 2: So when you're in conversation with your colleagues at MasterCard,

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Speaker 2: talk to me a little bit about aspirationally what the

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Speaker 2: world in the future looks like when we introduce quantum

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Speaker 2: computing to the payment system.

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Speaker 6: Yeah, so first, what quantum brings to the table is

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Speaker 6: it brings huge amount of computing in a different fashion,

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Speaker 6: it actually gets into the realm of even you know,

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Speaker 6: challenging today's cryptography and encryption, which is where the trust

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Speaker 6: is based on. So what we are working on is

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Speaker 6: we even created a crypto resistant cryptogram, you know, which

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Speaker 6: means a quantum resistant cryptrogram, which means that even a

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Speaker 6: quantum computer cannot actually decrypt that cryptogram or when the

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Speaker 6: transaction happens, it actually is very safe in nature. So

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Speaker 6: as the technology advances, you have to also advance in

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Speaker 6: this fraud prevention area because trust is the essence. The

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Speaker 6: day you break the trust of the consumer, they will

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Speaker 6: never transact and then you know, we would have a

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Speaker 6: tough time, you know, convincing the consumer and to do

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Speaker 6: these transactions.

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Speaker 5: So quantum does make a difference.

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Speaker 6: But we're looking into ways on how do you make

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Speaker 6: sure that these technologies are safe and secure?

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Speaker 2: To what extent are you using AI to actually help

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Speaker 2: build these platforms, which is to say, maybe you're relying

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Speaker 2: on it somewhat as a partner or a copilot or

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Speaker 2: a collaborator when your programmers are setting about developing software programs.

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Speaker 6: So AI is not new for us, right, We've used

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Speaker 6: AI for more than a decade. One of our three

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Speaker 6: of our services, one in three of our services today

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Speaker 6: leverages AI for insights and protection. And then we have

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Speaker 6: secured about one hundred and sixty billion transactions annually. And

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Speaker 6: then we have prevented over twenty billions of fraud every

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Speaker 6: year using AI. Now what's next is the next is

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Speaker 6: around this agent pay agent commerce. How do you make

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Speaker 6: sure that agent is a good agent? How do you

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Speaker 6: make sure that the user is present or not present

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Speaker 6: when they do the AI transaction? Because you can have

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Speaker 6: an autonomous transaction where the AI agent wakes up and

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Speaker 6: buys a ticket for you when the ticket price is

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Speaker 6: less than three hundred dollars. And the third thing is

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Speaker 6: the merchant may not be technologically sophisticated or not. How

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Speaker 6: do you make sure that this technologically unsophisticated merchant is

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Speaker 6: also part of this AI era. So that's what we

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Speaker 6: are working on. Prevent fraud, verify the consumer, make sure

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Speaker 6: the agent is good and it actually goes down to

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Speaker 6: a consumer who may not be AI sophisticated or a

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Speaker 6: merchant who may not be technologically sophisticated. That's what we're

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Speaker 6: working on by making one network do a lot of

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Speaker 6: heavy lifting and making more intelligent and more interoperable.

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Speaker 2: Sandy, before I let you go, describe for me the

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Speaker 2: current market dynamics in the APEC and your understanding about

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Speaker 2: the growth outlook for consumers and businesses in the region.

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Speaker 2: Is there a degree of optimism here or given some

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Speaker 2: of the volatility that we have seen not only in

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Speaker 2: markets but economies as well, are you a little maybe cautious?

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Speaker 6: I believe that Asia is leading in payments. It's not

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Speaker 6: the adopter of payment technology, it's the originator of that.

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Speaker 6: I personally see that the payment innovation is traveling from

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Speaker 6: east to west, where the other innovation might be traveling

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Speaker 6: from west to east. So I'm very optimistic. Seventy percent

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Speaker 6: of the real time payment transactions happening in Asia, and

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Speaker 6: there are wallets in China, there Alipay, v chat pay,

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Speaker 6: you have g cash and Philippine means they are just

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Speaker 6: buzzing driving electronic and digital transactions. What we're doing is

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Speaker 6: we are trying to create interoperability with these other ecosystems,

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Speaker 6: so which means you could be a consumer from the

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Speaker 6: US traveling to China. You can download an Alipay app,

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Speaker 6: you can put your card in there, and you can

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Speaker 6: transact wherever Alipay is accepted with no changes to the merchant.

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Speaker 6: That's just brilliant. This is where you brought in a

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Speaker 6: card ecosystem and a quality ecosystem talk to each other. That's,

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Speaker 6: in simple words, in properability. And wouldn't be cool that

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Speaker 6: somebody from Philippines using a g cash app goes to

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Speaker 6: the US, taps on a terminal and New York City

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Speaker 6: in New York City transit and that works with no changes.

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Speaker 6: I think that's introberability which we are seeing, and that's

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Speaker 6: where I'm very happy about you know, Asia is leading

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Speaker 6: the edge in this digital payments which is safe and secure.

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Speaker 2: So does it make sense to continue to cooperate with

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Speaker 2: these competing platforms or maybe at some point to become acquisitive.

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Speaker 6: Absolutely, I mean the whole idea is to partner because

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Speaker 6: we will never win the game alone. We have to

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Speaker 6: go together. So the wallets bring in the consumers. They

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Speaker 6: bring in an amazing consumer experience. We bring in acceptance,

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Speaker 6: which is one hundred and fifty plus million locations around

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Speaker 6: the world. We'll bring in trust, we bring in you know,

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Speaker 6: dispute resolution and things go wrong. So the whole idea

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Speaker 6: is to partner and basically leverage the strengths of what

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Speaker 6: each of these entities bring together. And that's how we

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Speaker 6: have grown over the last sixty years plus.

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Speaker 2: So you wouldn't buy a platform outright, I.

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Speaker 6: Mean built by partners. Our strategy so where it makes

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Speaker 6: sense we would build, whether we buy or whether we partner.

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Speaker 6: Partnership seems to be one of the best strategies so far,

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Speaker 6: so that's what we focus on. But when it makes sense,

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Speaker 6: we have bought companies, We've bought Recorded Future, you know,

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Speaker 6: which tracks fraud around the globe. We've done a corporative

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Speaker 6: exercise with Corpe which.

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Speaker 5: Actually drives forth business to business payments.

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Speaker 6: So we look at well where it makes sense to

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Speaker 6: build by a partner and be adop that strategy.

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Speaker 2: Sandai believe it there. Thank you so much for making

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Speaker 2: time to chat with me. Sandeep Maholtra. He is Executive

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Speaker 2: VP of Core Payments for the Apac Region at MasterCard.

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Speaker 2: Thanks for listening to today's episode of the Bloomberg Daybreak

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Speaker 2: Asia Edition podcast. Each weekday, we look at the story

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Speaker 2: shaping markets, finance, and geopolitics in the Asia Pacific. You

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Speaker 2: can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,

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Speaker 2: or anywhere else you listen. Join us again tomorrow for

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Speaker 2: insight on the market moves from Hong Kong to Singapore

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Speaker 2: and Australia. I'm Doug Chrisner, and this is Bloomberg