The highly-fancied Indonesians, who walloped the Malaysians 5-1 in their maiden group clash, were expected to come out on tops once again but three goals in 12 minutes after the interval thanks to a brace from Safee Sali and a strike from Ashari Samsuddin condemned the Riedl's charges to a damaging defeat at the Buki Jalil Stadium.
"The match went very normally in the first half and stayed that way early in the second half. But once they took a 1-0 lead, it changed everything. Malaysia got much more confident and our defence got more confused," said Riedl, who spoke to affsuzukicup.com after the game.
"Football can sometimes be very tough. Until now, we have had a very good tournament but after this match, there is a good chance that we might not win the final.
"Our defence has played well during the tournament but today, they were nowhere. They were too far away from their opponents when they had possession and that made it harder because Malaysia's two strikers, Norshahrul Idlan and Safee Sali are dangerous players who have good technique."
The Austrian dismissed suggestions that his troops could not handle playing away for the first time of this edition's tournament.
"We did not have a problem playing here. We controlled the game and until Malaysia took a 1-0 lead, the play was about 50-50. But an individual mistake by one of our defenders made a difference as it gave them a crucial goal.
"After they took a 1-0 lead, it was easy for them to play against us in the second half. The goals came very fast because our defence had not stabilised and they managed to score a second and a third. They might even have scored more goals because they had chances."
Riedl also did not buy the argument that laser pointers shone at his players and goalkeeper Markus Harison distracted them as they conceded the goals soon after the match restarted due to a six minute stoppage to address the problem.
"It affected our players especially our goalkeeper because they had lasers pointed at his face and I had to ask the fourth official to stop the game," Riedl said.
"Of course, the lasers affected our players but I think that falling behind 1-0 had more of an effect on them.
"I have to ask the players how badly it affected them but I think that the using the laser pointers on opponents is a bad thing for sport and for football and I hope that we can stop it."
Indonesia now have a huge mountain to climb in their return leg in Jakarta on Wednesday but Riedl is not about to write his team off yet.
"Of course it will be very, very difficult to win 4-0 in the return game although I think that winning 3-0 over 90 minutes is possible although the chances are slim.
"We were the clear favourites to win the tournament but after losing 3-0, we are now the outsiders. We will have to take a lot of risks and we must be patient. We will try but I think that we only have a five to 10 per cent chance of winning the tie."
"But the players have already got themselves psyched up for the match. Two minutes after the game, they said that they were going to Jakarta to win. There is still a chance and anything can happen in football."
Both Malaysia and Indonesia will be gunning for their first ever AFF Suzuki Cup title.