(Oct 30): Indonesian President Prabowo Subianto’s brother stressed the importance of a trusted and transparent local share market, saying the country must “mitigate the MSCI issue” and telling business leaders at a forum Thursday to stop “deep frying” stocks.

“I’ve been tasked by the president to help ensure this doesn’t spiral out of control,” Hashim Djojohadikusumo said in Jakarta, speaking in his roles as the president’s special envoy and chairman of the advisory board of the Indonesian Chamber of Commerce and Industry.

“This is a very, very serious issue,” Hashim said. “Because if foreign investment pulls out of our stock market, the rupiah could weaken further. We’ll have to pay more for our foreign loans. This could become a disaster and catastrophe for the Indonesian economy.”

US index provider MSCI Inc earlier this month warned that Indonesia’s stock market could be downgraded to standalone status — a more severe step than previously considered — due to concerns about opaque ownership and the potential for coordinated trading in one of Southeast Asia’s biggest equity markets.

The country’s benchmark stock index is down about 41% this year, including a 3.5% slide on Thursday, as regulators seek to strengthen oversight, surveillance and enforcement. After MSCI’s shock Oct 15 statement, Indonesia’s Financial Services Authority (FSA) announced sanctions against more than a dozen entities for violations in cases related to market manipulation.

FSA chair Friderica Widyasari Dewi told reporters on the sidelines of the Kadin event that some of the sanctioned companies have since paid 2.1 trillion rupiah (US$116 million or RM470 million) in fines. The FSA has yet to reveal names of the sanctioned entities.

Hashim, speaking days after Prabowo said his message to MSCI was that “the Indonesian nation is not afraid of anyone and will not be intimidated”, made his remarks before an audience of hundreds of business heavyweights including tycoons Anindya Bakrie and Franky Widjaja. 

Hashim urged people to stop “deep frying” stocks — a practice that refers to coordinated trading of shares that drives the price sharply higher, often with little connection to a company’s fundamentals.

Widjaja is the ultimate controlling shareholder of PT Dian Swastatika Sentosa, one of the firms caught up in the crackdown on stock manipulation.

“Please stop deep frying stocks immediately because the government intends to take firm action,” Hashim said, adding that, by some estimates, outflows from a double MSCI downgrade could weaken the rupiah to 22,000 per dollar. “This would have an extraordinarily negative political impact.”

Bank Indonesia Governor Destry Damayanti told reporters at the event that the rupiah’s movements reflect various factors, including market sentiment, but that the central bank remains focused on maintaining currency stability to foster growth in real sectors. She said rupiah stability was supported by relatively sound economic fundamentals, and didn’t remark on the estimates shared by Hashim. 

Hashim also said the country’s stock market malaise more broadly was hurting ordinary Indonesians.

“There are 32.7 million Indonesian citizens who hold brokerage accounts — in other words, they’re investing through the stock market,” he said. “Well, the problem is that right now, those 32.7 million Indonesians are extremely dissatisfied with the situation. They’re unhappy because the value of their stocks has dropped.”

Hashim, a tycoon in his own right, has long been a key political and financial backer of his elder brother, helping bankroll his presidential campaigns. Indonesia is due to hold its next presidential election in 2029.

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