US Intensifies Financial War on China; Ex-Intel Chief Urges 'Economic Security' Response

The United States is poised to reshape global finance with its upcoming "global trading hours" initiative, expanding trading to 23 hours a day, five days a week, starting December 6. This move, approved by the US Securities and Exchange Commission, is seen not merely as a market adjustment to accommodate cryptocurrency trends but as a strategic maneuver to reinforce America's role as a global capital hub amidst de-dollarization pressures, particularly from China.

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This is a major reshaping and strengthening of the global financial strategic landscape, with particularly huge impacts on the global, especially Asian, financial community.

Former Lieutenant General Liu Der-liang, ex-director of Taiwan's Military Intelligence Bureau, argues that this development warrants a response at the "economic security" level, transcending the purview of mere financial regulators. He contends that while the extended trading hours offer benefits like increased trading flexibility and easier hedging against geopolitical events for global investors, they also present substantial risks.

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The new measures have characteristics of increased trading flexibility and elimination of hedging time differences. When geopolitical events or economic data are released, positions in US stock assets can be hedged and adjusted immediately.

Liu highlights potential negative consequences, including the "draining of liquidity" from regional markets and the marginalization of exchanges in Asia. He warns that Asian retail and institutional investors might shift their capital towards US dollar assets, thereby diminishing trading volumes in markets like Japan, South Korea, Hong Kong, and Southeast Asia. The "thin liquidity" during extended night sessions could also lead to price slippage, increasing the risk for Asian investors facing market volatility.

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Asian local retail and institutional funds may further shift to dollar assets, weakening the trading volume of stock markets in Japan, South Korea, Hong Kong, and Southeast Asia, with local Asian stock markets being 'sucked dry' of funds.

For Taiwan specifically, Liu identifies five critical impact areas: accelerated capital outflow to US markets, intensified competition for the Taiwan Stock Exchange, a potential brain drain of financial talent to international markets, shifts in the payment ecosystem possibly influenced by dollar stablecoins, and an elevated importance of financial sanction risks. These factors, he stresses, require proactive government attention and strategic planning.

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The 'thin liquidity' in night trading leads to price slippage, increasing the risk for Asian investors of being 'shaken out' or bearing high slippage costs.