Shares in Indonesian coal producer Dian Swastatika Sentosa trade at 135 times earnings, a valuation far exceeding that of AI darling Nvidia, which carries a multiple of 38. An FT analysis reveals eight of Indonesia's top 25 listed firms sport price-to-earnings ratios above 100, leading some managers to dub them ‘saham gorengan’ or ‘deep fried stocks.’

These extreme multiples stem from extremely low free floats, meaning controlling shareholders hold the vast majority of stock, creating thin liquidity. This opacity prompted MSCI in January to question Indonesia’s investability, warning of a potential downgrade from emerging to frontier market status over concerns about shareholding structures.

Investors allege that tightly held shares can allow insiders to manipulate prices through non-arm's length trading, creating artificial trading activity. Barito Renewables, controlled by the nation’s richest person, exemplifies this, boasting a 358 P/E multiple against a mere 12.6 per cent free float.

Jakarta is attempting to address governance issues by doubling the minimum free float requirement to 15 per cent, though compliance is deferred three years. Until transparency improves and liquidity deepens, global funds relying on index exposure face exposure to these highly concentrated, volatile holdings.