The Jakarta Composite Index fell 4.9% on Tuesday, putting it in "bear market" territory - typically defined as a 20% fall from a stock index's recent peak.

 

The index has now fallen 21% from its high in May. 

 

The concerns about Indonesia's economy have also weighed on its currency, the rupiah, which has fallen to a four-year low against the US dollar.

 

The rupiah traded at about 10,694 to the dollar on Tuesday, down nearly 11% since the start of this year. 

 

 

Last week, Indonesia's central bank said that its current account deficit widened to $9.8bn  during the second quarter of the year, from $5.8bn in the previous three months.

 

The central bank also said that the foreign currency reserves it holds fell to $92.67bn in July, from $98.09bn a month earlier. 

 

A current account deficit - which is a broader measure than the trade deficit, and includes cross-border investment income flows - affects a country's foreign currency reserves as well as the value of its currency.

 

Analysts² said that the rising deficit had hurt investor³ morale⁴.

 

"Although the current level of reserves is still equivalent to a reasonably healthy 5.5 months of imports, the [central] bank can't continue to burn reserves at the current rate without the market worrying about a 'crisis' scenario⁵ unfolding," economists⁶ at Credit Suisse said in a note to clients on Monday.

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