What was the main trigger for the 1997 Asian financial crisis that spread across regional stock markets?

The 1997 Asian financial crisis was triggered by Thailand's devaluation of the Thai baht. On July 2, 1997, Thailand abandoned its long-standing exchange-rate arrangement and allowed the baht to float after intense pressure on its foreign-exchange reserves.

The baht had been effectively tied to the U.S. dollar while Thailand carried large external debts, including substantial private-sector borrowing. Property speculation, weak financial institutions, and short-term foreign loans made the economy vulnerable. Once the peg failed, investors questioned other Asian currencies and markets.

Capital flowed out of Indonesia, Malaysia, South Korea, and the Philippines. Stock markets fell, currencies depreciated, and companies with dollar-denominated debts faced sharply higher repayment costs. The International Monetary Fund organized rescue programs for several affected economies, including Thailand, Indonesia, and South Korea.

The crisis did not affect every Asian economy in the same way. Hong Kong defended its currency peg, while China maintained the renminbi's exchange rate. The episode led many governments to build larger foreign-exchange reserves and strengthen financial regulation.