Students must select and analyse a specific historical market event. A description of the event is required, with justification offered as to why this event is considered worthy of study. The event’s...

GLOBAL FINANCIAL MARKETS AND INSTITUTIONS (SEMESTER 2, 2018/2019)
CODE: 6FNCE003W
STUDENT NAME: Derick Gan
STUDENT ID: w1592755
WORD COUNT: 1632
COURSEWORK TITLE: ANALYSIS OF MARKET EVENT
ASSIGNMENT TITLE: 1997 ASIAN FINANCIAL CRISIS
Table of Contents
Introduction    3
Justification for Choosing the Event    3
Factors behind the Asian Financial Crisis 1997    3
Impact of the Event    5
Conclusion    7
References    8
Introduction
The macroeconomic crisis experienced in Asia during mid-1997 caused a rapid devaluation in cu
encies and capital outflows. Started from Thailand, such spillover effect were so extensive that other financial market and institution particularly from Southeast Asia regions bore most of the
unt. With other parts of Asia
iefly affected, it subsequently pressured the global economy. To scale down the possibility of this negative domino effect from occu
ing in the future, various risk management practices will be considered within this context.
Justification for Choosing the Event
The Asian Financial Crisis was one such event that had an impact on a large number of countries. I
espective of the origin point of crisis, the event negatively affects stock market, financial market and institutions. According to the views of Mishkin and Eakins (2015), the event is a classic example of poor strategic financial planning on the part of corporate and government. Boom and bust in Asia as well as lack of incentives for risk management led to crisis. A comprehensive study of such an event enables in understanding the financial market in an effective way. In addition, the role of financial institution in such a scenario also becomes clear. Readers can also related the importance of components of economy and the relation between such parts.
Factors behind the Asian Financial Crisis 1997
Consistent Cu
ent Account Deficit: The cu
ent Account Deficit of Thailand and few South Asian countries was high, which led to huge bo
owing from foreign institution to meet the payment obligations. At the time of devaluation of cu
ency, the affected countries were unable to manage the widening gap. Apart from these, there was also the impact of the external vulnerabilities because the crisis was preceded by a significant increase in the capital flows to the region. In the early 1990s, there was a significant increase in the short-term lending by both the commercial banks and the firms in the region. The lending was directed towards non-financial private firms. It was perceived that the transaction would be profitable. However, excessive lending led to more capital flow in the economy at high risk. According to Almeida, Kim and Kim (2015), there was a clear misjudgement of the risk between the bo
ower and the lender. It was mainly seen in the Southeast Asian countries such as Malaysia, Korea, Thailand, Hong Kong, Philippines and Indonesia.
Huge Debt from Foreign Institutions: The policies were ineffective in checking the checking the excessive build-up of risks and fragility of the financial sector. However, the change in the value of foreign cu
encies can take place i
espective of the health of financial system. The private organisation had raised huge debt from financial institution, especially that of United States. As per the views of D’Souza (2016), the low rate of interest ignited the urge among the private entrepreneurs to bo
ow from such institutions. In addition to that, pegging up of the domestic cu
ency against the U.S dollar ensured that the bo
owed amount in domestic cu
ency remained fixed. As per the perspective of Xue and Taylor (2018), few private firms were...