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.

By Norman Harsono and Grace Sihombing“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 announced sanctions against more than a dozen entities for violations in cases related to market manipulation.

Hashim, speaking to an audience of hundreds of business heavyweights including tycoons Anindya Bakrie and Franky Widjaja, also 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.

“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.”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.