The Jakarta Composite Index fell 1.2% Monday, extending its decline after three weeks of losses as concerns surrounding the escalating US-China trade war hit markets across Asia. The wider-than-expected first quarter current account deficit reported Friday added to the wall of worry. Malaysia’s FTSE Bursa Malaysia KLCI Index didn’t partake in the global rally and swung between gains and losses earlier this year. The benchmark index has lost almost 7% this year.

“What happened was a mix of several factors, from global to domestic,” John Teja, a director at Ciptadana Sekuritas, said by phone. He pointed to the continuation of the U.S.-China trade rift, concerns surrounding Indonesia’s macroeconomic fundamentals and a volatile currency.

Foreign investors sold a net $260 million of Indonesian stocks in the past six days, the biggest weekly outflows since February. Investors withdrew about $87 million from the iShares MSCI Indonesia ETF last week, the biggest outflows since at least 2010, according to data compiled by Bloomberg. The MSCI Indonesia ETF dropped 3.5% Monday in the U.S., its steepest decline since Oct. 24

Earlier this year, Indonesia’s benchmark index came close to hitting a fresh record high after rallying almost 6% amid falling oil prices and central banks’ dovish stances. That came to a halt when the 2018 current account deficit widened to a four-year high, raising concerns about the shortfall weighing on the nation’s economy.

Indonesia’s current-account deficit makes the country more reliant on foreign investment and therefore vulnerable to outflows when investor sentiment turns sour. Market watchers are often fixated on whether the deficit, the broadest measure of trade in goods and services, widens or not to determine an economy’s vulnerability.

Hopes for an interest rate cut may have cooled. Market watchers had previously expected that the central bank may have room to start easing its monetary policy in the second half of this year.

Election Results

“There isn’t much that we can do unfortunately, but obviously, all eyes will be on May 22,” Harry Su, managing director and head of equity capital markets at Samuel International, said by phone, citing the date of official election results. “We have to get over that domestically. If things are safe and nothing happens, that would be the first big hurdle we overcome, he added.

Thousands of people rallied in Jakarta on Friday to protest the preliminary results of last month’s presidential election that show Joko Widodo has won a second term as president. The rally came as presidential challenger Prabowo Subianto continues to dispute the result of the April 17 vote. The government as well as independent observers have rejected the former general’s allegations of widespread voter fraud.

The incoming government will have to implement sound policies related to labor and investment reforms, Su said. “The market will take its cue from that,” he added.

Rupiah

The escalating trade tensions has impacted the yuan and in turn has hurt the sentiment on Indonesia’s currency. The rupiah fell to a four-month low last week.

“Further tariff imposition on the remaining of $300 billion of Chinese exports to the U.S. will definitely weaken the yuan and hurt sentiment on other markets including Indonesia,” Jeffrosenberg Tan, a strategist at Sinarmas Sekuritas, said by text message. “This may create further downside risks on both equity and bond markets.”

“It’s a bit difficult to see a sudden reversal of the stock market in the short term because of a lack of positive catalysts globally and domestically,” Chandra Pasaribu, head of research at Yuanta Securities, said by phone.

Pasaribu expects the nation’s stock market to rebound in the second half of this year with the caveat that global risks have to be settled.

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