Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Welcome to the Daybreak Asia podcast. I'm Doug Chrisner. In
Speaker 2: the States, risk assets were sold down, with big cap
Speaker 2: tech and cryptocurrencies bearing the brunt of the selling.
Speaker 3: Now.
Speaker 2: That drop came after a number of Wall Street executives
Speaker 2: warned of a pullback in the equity market. At the
Speaker 2: same time, the hedge fund manager Michael Burry placed a
Speaker 2: one point one billion dollar bet against leading artificial intelligence
Speaker 2: related stocks. For more on the market action, we caught
Speaker 2: up with Anna Wou. She is cross asset investment specialist
Speaker 2: at Vanek who spoke with Bloomberg TV host April Hong
Speaker 2: and shry On and I.
Speaker 1: Great to have you with us as we get the
Speaker 1: Asian session started. We have already seen significant pressure over
Speaker 1: in South Korea, for example, because of the Career Exchange
Speaker 1: warning about s k Heinix, because of that incredible AI rolly.
Speaker 1: Where are we in Asia when it comes to these
Speaker 1: valuations of these high flying tech stocks.
Speaker 3: Hello from Sydney and good to see you. I think
Speaker 3: very much to your point. We had a five month
Speaker 3: rally in AI thematic in the US and cross the board,
Speaker 3: so the bar is simply just getting higher. So now
Speaker 3: a modest earning speed does not translate into price reaction anymore.
Speaker 3: To that point, the similar sentiment, I guess it's flowing
Speaker 3: into the Asia market as well. After such a rally
Speaker 3: that we have seen in South Korea, China, arguably in Japan,
Speaker 3: I think that bar right now is getting higher as well. However,
Speaker 3: I want to bring your attention to the valuation landscape.
Speaker 3: Right even after the broader rally in Asia tech that
Speaker 3: we have seen so far, it's still valued much lower
Speaker 3: than the US tech and which makes it really a
Speaker 3: value and a growth play in the long term. And
Speaker 3: if we look at the EPs growth, it's not great,
Speaker 3: but it's improving sectors sector for the sector quarters after quarter.
Speaker 3: So I think the long term story for this sector
Speaker 3: in Asia is still constructive.
Speaker 1: One of all, not necessarily the direct the AI please,
Speaker 1: but the indirect ones because we know that in order
Speaker 1: to power artificial intelligence will need the energy for example.
Speaker 1: That that's a great question.
Speaker 3: I really love that because exactly the global AI industry
Speaker 3: is maturing over the last couple of years, so it's
Speaker 3: gone from you know, this idea generation phase who has
Speaker 3: the best model really to an operational intelligence phase where
Speaker 3: we need to see actual monetization an operational AI ecosystem.
Speaker 3: And in that sense, the supplementary roles into the AI
Speaker 3: rally right now are benefiting and also positioned to benefit
Speaker 3: in the coming quarters as the margin expansion goes in.
Speaker 3: To your point, energy play is one of the one
Speaker 3: of the pockets of opportunities that's getting a lot more
Speaker 3: attention compared to the previous quarters because AI after the
Speaker 3: record amount of AI capex energy and electricity demand in specific,
Speaker 3: it's rallying two decade high and it's positioned to go
Speaker 3: ten x in by twenty thirty. So that demand gap
Speaker 3: needs all sorts of energy play. So you know, one
Speaker 3: of the more prominent play right now is the nuclear
Speaker 3: It gives twenty four to seven clean non emission play
Speaker 3: from that part and benefiting the uranium minus as well,
Speaker 3: and to a certain extent, the renewable other renewable energy
Speaker 3: sources companies have been growing very fast in the second
Speaker 3: half of the year. Also look at the valuation side
Speaker 3: as well, and pointing to that growth and value play,
Speaker 3: they are very attractively valued comparing to the other pockets
Speaker 3: of AI.
Speaker 4: With that in mind, which market do you think will
Speaker 4: lead the way for the rest of US year and
Speaker 4: into the first quarter of next year. Is it still
Speaker 4: going to be perhaps South Korea for the region, especially
Speaker 4: given how we're seeing a resurgent dollar.
Speaker 3: Yeah, okay. I think that question really goes into two parts.
Speaker 3: I think in terms of markets that is positioned well
Speaker 3: towards the end of the year to next year, Korea
Speaker 3: is one of the more high conviction market because it's
Speaker 3: got the cleanest growth play right now and also translating
Speaker 3: into the latest earning season while it's still quite early days,
Speaker 3: but we can still see that over half of the
Speaker 3: companies are reporting surprising to the upside. Also, it's got
Speaker 3: two cleanest play in terms of growth. One is AI.
Speaker 3: It's strategic position in the high member chip specialist role
Speaker 3: in in the global AI supply chain is giving it
Speaker 3: a long term tailwind and long term contracts as well
Speaker 3: with margin expansion possibilities. But also it has a very
Speaker 3: unique role in the global defense sector and also that
Speaker 3: has an AI play to it as well. So these
Speaker 3: two catalysts, I guess is driving the career market to
Speaker 3: a broader growth play. Outside of that, I think China,
Speaker 3: even though right now the the rally has stoled a
Speaker 3: little bit, and I think investors are waiting for a
Speaker 3: more pronounced and substantial policy stimulus to to you know,
Speaker 3: pick on that rally again. And but also AI sector
Speaker 3: in that country can still defy gravity as the broader
Speaker 3: I guess hardware makers rally and race to to to
Speaker 3: fight for the role for China's the domestic Navidia.
Speaker 2: That was ANAWU Cross Asset investment specialist at Vanek speaking
Speaker 2: to Bloomberg TV host April Hong and shrry On here
Speaker 2: on the Daybreak Asia podcast. Welcome back to the Daybreak
Speaker 2: Asia Podcast. I'm Doug Chrisner. Economies across Asia are being
Speaker 2: reshaped by a new reality or realities plural. We've got
Speaker 2: higher US tariffs, softer Chinese demand, and the growing impact
Speaker 2: of artificial intelligence. And in the midst of it all,
Speaker 2: money moving faster and more securely across borders. Joining me
Speaker 2: now for a closer look is Sandeep Mahultra. He is
Speaker 2: Executive VP of Core Payments for the Asia Pacific at MasterCard. Sandeep,
Speaker 2: thank you so much for making time to chat with
Speaker 2: me lately. I think we can agree on this much.
Speaker 2: There has been a tremendous amount of focus on the
Speaker 2: use of artificial intelligence. Give me a sense right now
Speaker 2: best you can on how MasterCard is using AI, especially
Speaker 2: in the APEC region.
Speaker 5: Yeah, well, first of all, thank you for having me on.
Speaker 5: And you know AI is the is the tok of
Speaker 5: the town.
Speaker 6: So if you look at MasterCard, you know our big
Speaker 6: focus used to be converting cash to digital and then
Speaker 6: over the last you know, one year or so, we
Speaker 6: are actually taking this to the next level, so taking
Speaker 6: digital to intelligent and this is where AI plays a
Speaker 6: big role, where we are looking at intelligent transactions just
Speaker 6: not digital, and we are actually changing our network to
Speaker 6: be ready for this connected commerce, which is our vision
Speaker 6: for twenty.
Speaker 5: Thirty driven by AI. So what is AI going to do?
Speaker 6: We want to make sure that consumers, when they do
Speaker 6: discovery of the products or search the products on an
Speaker 6: AI agent, are able to even do a purchase or
Speaker 6: that without leaving that agent. Sounds very simple, but behind
Speaker 6: the scenes, it's very complex.
Speaker 3: Right.
Speaker 6: What happens if you ordered green pair of socks and
Speaker 6: red rive, who takes care of that? What happens if
Speaker 6: a fraudulent transaction happens? How do you take care of that.
Speaker 6: So what we are trying to ensure is that we're
Speaker 6: trying to create a very safe, secure, and a transparent
Speaker 6: kind of an environment for these agents to perform the transaction.
Speaker 2: I'm wondering now on the degree to which you are
Speaker 2: collaborating with other software developers over or whether this is
Speaker 2: primarily something that is proprietary to the extent that you
Speaker 2: need to employ a number of software engineers to help
Speaker 2: facilitate this goal. What's the balance between collaboration and kind
Speaker 2: of going alone in house.
Speaker 5: It's all collaborative, it's all partnership.
Speaker 6: It's all based on standards because you cannot anything propriety
Speaker 6: because it won't scale. And if it doesn't scale, it
Speaker 6: doesn't matter. So what we're trying to do is we're
Speaker 6: working with the fidos of the world, which is the
Speaker 6: standard community. We're working with cloud Flare and I'll tell
Speaker 6: you what that does. We're working with PayPal, We're working
Speaker 6: with many other partners to make sure that the transaction
Speaker 6: happens in a safe, secure fashion.
Speaker 4: You know.
Speaker 6: One example is you want to make sure that when
Speaker 6: the merchant accept a transaction, that agent is a good agent.
Speaker 5: How do you do that?
Speaker 6: And that's where cloud Flare club comes into picture, which
Speaker 6: basically will block unit agent which is not a good agent,
Speaker 6: and that provides, you know, comfort to the merchant who's
Speaker 6: accepting those transactions.
Speaker 2: So in the last two week here in the States,
Speaker 2: we heard from a number of those big hyper scalers
Speaker 2: on their AI caps spend. And I'm curious about the
Speaker 2: degree to which you feel, maybe not you personally, but
Speaker 2: MasterCard as a company feels compelled to lay out vast
Speaker 2: sums of money in the capex realm in order to
Speaker 2: be ready for this kind of change that you're describing.
Speaker 6: Look, I think the hyperskillers are doing what they are
Speaker 6: best in in terms of creating models, in terms of
Speaker 6: providing the computing data to make sure that that is done.
Speaker 6: What we are doing is we are basically saying, if
Speaker 6: you search using that data to find an item you like,
Speaker 6: we will make sure that that transaction which is done
Speaker 6: within that AI interface, whether it's an agent, whether it's
Speaker 6: some other protocol which the consumer is using, or if
Speaker 6: the merchant has made a change, we will make that
Speaker 6: commerce become safe, secure and intelligent and give comfort to
Speaker 6: the consumer without leaving that agent, you know, domain.
Speaker 2: San Deepe I'm curious as to whether there are certain
Speaker 2: areas of the digital payment space that you're particularly concerned about,
Speaker 2: perhaps something that you have to almost counter program again
Speaker 2: anst whether there is a level of risk for your
Speaker 2: business or the businesses of your customers. What are the
Speaker 2: areas most concerning to you?
Speaker 6: It is it is a big concern that if you
Speaker 6: look at just Asia loan Asia lost about close to
Speaker 6: six and seventy billion dollars of money due to fraud
Speaker 6: in thus last year. So sixty percent of the banks
Speaker 6: are brightticing AI driven fraud prevention and identity verification. So
Speaker 6: that's a big focus for us. How we're going to
Speaker 6: do that is we want to make sure that the
Speaker 6: card numbers which you have don't exist anymore. So, whether
Speaker 6: you save a card on file at Macy's dot Com,
Speaker 6: we're going to replace it with a token, whether you
Speaker 6: basically have a Apple Pay transaction that replaced by a
Speaker 6: token even today.
Speaker 5: And then even the.
Speaker 6: Cards which are on the physical card, the card numbers,
Speaker 6: we're going to make them numberless as well. So the
Speaker 6: big focus is make that tokenized. No more card numbers
Speaker 6: anywhere on the planet, and that's our goal for twenty
Speaker 6: thirty and we must verify the user. We will make
Speaker 6: sure that you are who you are for every transaction.
Speaker 6: So fraud is the risk. But this tokenization and authentication,
Speaker 6: which is verifying every user for every transaction, that's the
Speaker 6: next step which we are moving towards and made a
Speaker 6: big progress around that.
Speaker 2: So when you're in conversation with your colleagues at MasterCard,
Speaker 2: talk to me a little bit about aspirationally what the
Speaker 2: world in the future looks like when we introduce quantum
Speaker 2: computing to the payment system.
Speaker 6: Yeah, so first, what quantum brings to the table is
Speaker 6: it brings huge amount of computing in a different fashion,
Speaker 6: it actually gets into the realm of even you know,
Speaker 6: challenging today's cryptography and encryption, which is where the trust
Speaker 6: is based on. So what we are working on is
Speaker 6: we even created a crypto resistant cryptogram, you know, which
Speaker 6: means a quantum resistant cryptrogram, which means that even a
Speaker 6: quantum computer cannot actually decrypt that cryptogram or when the
Speaker 6: transaction happens, it actually is very safe in nature. So
Speaker 6: as the technology advances, you have to also advance in
Speaker 6: this fraud prevention area because trust is the essence. The
Speaker 6: day you break the trust of the consumer, they will
Speaker 6: never transact and then you know, we would have a
Speaker 6: tough time, you know, convincing the consumer and to do
Speaker 6: these transactions.
Speaker 5: So quantum does make a difference.
Speaker 6: But we're looking into ways on how do you make
Speaker 6: sure that these technologies are safe and secure?
Speaker 2: To what extent are you using AI to actually help
Speaker 2: build these platforms, which is to say, maybe you're relying
Speaker 2: on it somewhat as a partner or a copilot or
Speaker 2: a collaborator when your programmers are setting about developing software programs.
Speaker 6: So AI is not new for us, right, We've used
Speaker 6: AI for more than a decade. One of our three
Speaker 6: of our services, one in three of our services today
Speaker 6: leverages AI for insights and protection. And then we have
Speaker 6: secured about one hundred and sixty billion transactions annually. And
Speaker 6: then we have prevented over twenty billions of fraud every
Speaker 6: year using AI. Now what's next is the next is
Speaker 6: around this agent pay agent commerce. How do you make
Speaker 6: sure that agent is a good agent? How do you
Speaker 6: make sure that the user is present or not present
Speaker 6: when they do the AI transaction? Because you can have
Speaker 6: an autonomous transaction where the AI agent wakes up and
Speaker 6: buys a ticket for you when the ticket price is
Speaker 6: less than three hundred dollars. And the third thing is
Speaker 6: the merchant may not be technologically sophisticated or not. How
Speaker 6: do you make sure that this technologically unsophisticated merchant is
Speaker 6: also part of this AI era. So that's what we
Speaker 6: are working on. Prevent fraud, verify the consumer, make sure
Speaker 6: the agent is good and it actually goes down to
Speaker 6: a consumer who may not be AI sophisticated or a
Speaker 6: merchant who may not be technologically sophisticated. That's what we're
Speaker 6: working on by making one network do a lot of
Speaker 6: heavy lifting and making more intelligent and more interoperable.
Speaker 2: Sandy, before I let you go, describe for me the
Speaker 2: current market dynamics in the APEC and your understanding about
Speaker 2: the growth outlook for consumers and businesses in the region.
Speaker 2: Is there a degree of optimism here or given some
Speaker 2: of the volatility that we have seen not only in
Speaker 2: markets but economies as well, are you a little maybe cautious?
Speaker 6: I believe that Asia is leading in payments. It's not
Speaker 6: the adopter of payment technology, it's the originator of that.
Speaker 6: I personally see that the payment innovation is traveling from
Speaker 6: east to west, where the other innovation might be traveling
Speaker 6: from west to east. So I'm very optimistic. Seventy percent
Speaker 6: of the real time payment transactions happening in Asia, and
Speaker 6: there are wallets in China, there Alipay, v chat pay,
Speaker 6: you have g cash and Philippine means they are just
Speaker 6: buzzing driving electronic and digital transactions. What we're doing is
Speaker 6: we are trying to create interoperability with these other ecosystems,
Speaker 6: so which means you could be a consumer from the
Speaker 6: US traveling to China. You can download an Alipay app,
Speaker 6: you can put your card in there, and you can
Speaker 6: transact wherever Alipay is accepted with no changes to the merchant.
Speaker 6: That's just brilliant. This is where you brought in a
Speaker 6: card ecosystem and a quality ecosystem talk to each other. That's,
Speaker 6: in simple words, in properability. And wouldn't be cool that
Speaker 6: somebody from Philippines using a g cash app goes to
Speaker 6: the US, taps on a terminal and New York City
Speaker 6: in New York City transit and that works with no changes.
Speaker 6: I think that's introberability which we are seeing, and that's
Speaker 6: where I'm very happy about you know, Asia is leading
Speaker 6: the edge in this digital payments which is safe and secure.
Speaker 2: So does it make sense to continue to cooperate with
Speaker 2: these competing platforms or maybe at some point to become acquisitive.
Speaker 6: Absolutely, I mean the whole idea is to partner because
Speaker 6: we will never win the game alone. We have to
Speaker 6: go together. So the wallets bring in the consumers. They
Speaker 6: bring in an amazing consumer experience. We bring in acceptance,
Speaker 6: which is one hundred and fifty plus million locations around
Speaker 6: the world. We'll bring in trust, we bring in you know,
Speaker 6: dispute resolution and things go wrong. So the whole idea
Speaker 6: is to partner and basically leverage the strengths of what
Speaker 6: each of these entities bring together. And that's how we
Speaker 6: have grown over the last sixty years plus.
Speaker 2: So you wouldn't buy a platform outright, I.
Speaker 6: Mean built by partners. Our strategy so where it makes
Speaker 6: sense we would build, whether we buy or whether we partner.
Speaker 6: Partnership seems to be one of the best strategies so far,
Speaker 6: so that's what we focus on. But when it makes sense,
Speaker 6: we have bought companies, We've bought Recorded Future, you know,
Speaker 6: which tracks fraud around the globe. We've done a corporative
Speaker 6: exercise with Corpe which.
Speaker 5: Actually drives forth business to business payments.
Speaker 6: So we look at well where it makes sense to
Speaker 6: build by a partner and be adop that strategy.
Speaker 2: Sandai believe it there. Thank you so much for making
Speaker 2: time to chat with me. Sandeep Maholtra. He is Executive
Speaker 2: VP of Core Payments for the Apac Region at MasterCard.
Speaker 2: Thanks for listening to today's episode of the Bloomberg Daybreak
Speaker 2: Asia Edition podcast. Each weekday, we look at the story
Speaker 2: shaping markets, finance, and geopolitics in the Asia Pacific. You
Speaker 2: can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,
Speaker 2: or anywhere else you listen. Join us again tomorrow for
Speaker 2: insight on the market moves from Hong Kong to Singapore
Speaker 2: and Australia. I'm Doug Chrisner, and this is Bloomberg