In May 1997, Japan hinted at plans to raise interest rates to defend the yen, causing global investors to sell Southeast Asian currencies. This set off a decline in the value of those currencies and a tumble in local stock markets. Two months later, the Thai baht devalued, triggering market pressures on other Asian currencies such as the Malaysian ringgit, the Philippine peso and the Indonesian rupiah.
The Asian Financial Crisis ensued. A second wave of devaluations hit most of the Asian Tigers. Thanks to robust and rigorous banking and legal systems, and strong, healthy reserves, Singapore withstood the massive capital outflow from the region.
Singapore barricaded itself from the crisis' aftershocks by strengthening its financial system, adopting sound domestic economic policies, and liberalising its financial sector. During the crisis period, GIC maintained a close watch on the global and regional situation and on its own investments. These measures enabled GIC to grow as a global fund management company and continue building Singapore's reserves during the crisis.
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