In particular, investors failed to grasp inevitable links between market (liquidity) risks and credit risks. *  The expanding world financial market and lax controls over multi-national financial institutions encouraged excessive leveraging based on a relatively small capital base for hedge funds and certain banking institutions.
*  A herd-like reaction by international investors, once the bubble burst, that led to an almost panic-withdrawal of funds from economies that could not in a short period of time absorb the shock of the turnaround in the sentiment of international investors. The adverse developments in East Asia almost immediately affected emerging markets all around the world.