Jakarta's benchmark index rose 3 percent on Tuesday, after hitting a six-year low in the previous session as the world's worst-performing stock market this year dropped 14.8 percent over Friday and Monday.

MSCI on Friday said it was considering shifting Indonesia to "standalone" instead of "emerging markets" status, a more-severe-than-expected downgrade that shocked investors and officials.

To slow the heavy selloff on the market, which is down about 40 percent this year, the stock exchange this week halved the daily down limit on stock prices to 7 percent from 15 percent, while setting a Rp 1 down limit on shares priced at Rp 14 or less.

The move from the index provider has weighed on the rupiah as well, which strengthened slightly to 18,010 per US dollar on Tuesday but remained close to the record low of 18,190 hit in June.

Jakarta authorities met with the index provider on Monday to seek an explanation about its latest warning, which stemmed from concerns that Indonesia had yet to improve ownership transparency or clamp down on coordinated trading.

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Also on Monday, Indonesian President Prabowo Subianto held talks with finance chiefs, including the head of the Financial Services Authority (OJK), the finance minister and the central bank governor.

OJK chief Friderica Widyasari Dewi said the regulator would continue to advance Indonesia's capital market reforms, particularly regarding transparency, liquidity, and law enforcement against various forms of violations.

"A particularly important special message is how we must continuously enforce regulations against those who have committed violations related to coordinated trading and other similar practices," Friderica said after the meeting.

The regulator on Friday unveiled sanctions against those linked to alleged trading manipulation in shares of three firms, with the fines totaling Rp 2.1 trillion ($116.7 million).

In another step to address MSCI's concerns, the Indonesia Stock Exchange (IDX) on Monday said it would exclude from its benchmark index any stocks with a high concentration of ownership by the same person or entity.

"We will continue to carry out initiatives aimed at fostering greater transparency, a more credible market, and better governance," IDX President Director Jeffrey Hendrik said following the meeting with MSCI.

George Xu, a director in Fitch Ratings' sovereigns team, said the latest concerns and substantial market selloff reinforced the risks the rating agency identified when it revised the outlook on Indonesia to negative in March.

"From sovereign rating perspective, we do not anticipate the consultation announcement itself to have material immediate credit implications," he said, but said external pressure could raise the government’s borrowing costs and erode external buffers.

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