Selected East Asian Stock Markets in the Context of Financial Liberalization: Prior to the Crisis

The large capital inflow into East Asian stock markets in the late 1980s and early 1990s was prompted by a variety of international and domestic factors. This paper surveys the changes in capital and exchange controls, exchange rates, ownership regulations and information flows which prompted such high capital inflows. In the process, it suggests that early reformers, such as Hong Kong and Singapore, developed more stable financial sectors which were less susceptible to crisis. In contrast, countries which reformed and opened up to capital later (Korea, Thailand, Malaysia) had weaker financial sectors and were more prone to crisis caused by heavy capital inflows and subsequent outflows.