These flows had been engendered by the increasing diversification out of industrial country investment portfolios, induced in part by significant capital gains prior to the onset of the crisis in East Asia. Net private capital inflows into emerging markets roughly quadrupled between 1990 and 1997.
Such diversification was directed particularly at those economies in Asia that had been growing so vigorously through the 1970s, 1980s, and into the 1990s - the so-called “Asian tigers”. In the event, these economies were ill-prepared to absorb such volumes of funds, especially, as I shall shortly argue, because there were inadequate alternatives to banks for financial intermediation backup.