Malaysia experienced rapid economic growth at an average annual Gross Domestic Product (GDP) growth of 8.5% during the 1990s due to its financial liberalization policy. This rapid growth came to a halt after the impact of the Asian financial crisis occurred on 1997-1998 causing the economy into recession. This prompted the Malaysian government to urgently develop a sophisticated capital market backed by an efficient regulatory framework to instil investors' confidence in order to attract capital inflow from the local and foreign investors to restart the economy.

In the first two-thirds of the 1990s, Malaysia experienced rapid economic growth at an average annual Gross Domestic Product (GOP) growth of 8.5%; due to its financial liberalization policy that encourage greater participation of foreign direct investment and strengthening condition of exports. This rapid growth came to a halt with the onset of Asian financial crisis in mid-1997. During that time, the combination of sudden reversals in the net capital flow, exchange rate depreciation/devaluation, crash in stock market, fire sales on asset, corporate distress, and credit contraction lead the economy into recession.