Ket Shi, worshiped as a god by the tribe of Wildcats. He is actually a fairy and can understand human speech. Olive can meet him if she carries a Cat's Eye gem. In exchange for the gem, he will offer to either raise/lower her height or reduce her weight as a reward.
You can only trade with him once per visit to the Western Desert because even if you have more than one Cat's Eye gem in your inventory he will simply take every single Cat's Eye gem from your inventory after the first exchange.
Ket Shi will raise/lower your daughter's height by half an inch using a spell.
To raise her height he invokes: "Spirit of the Palm Tree higher than the South Sea moon, raise this child's stature a bit!"
The benefit of raising your daughter's height is that her "weight threshold" increases (roughly 3-4 pounds per half an inch increase in height). This is the recommended use for the Cat's Eye.
There is no benefit to lowering her height unless you are purposely trying to make your daughter tiny and overweight.
Ket Shi will reduce your daughter's weight by two pounds. The effect is the same as drinking Ancient Milk. Note that if you're trying to avoid her being overweight, it is more efficient to increase her height instead, which raises her weight threshold by more than this.
To reduce her weight he incants: "Pumice stone fromt he volcano of the Eastern Islands, absorb some of this child's weight!"
If you refuse his offer he will get very angry and steal the Cat's Eye gem anyway. You get nothing in return. Note that he will steal any additional Cat's Eye gem that you have in your inventory as well.
Here's the script word-for-word (so you don't have to go through the trouble):
Olive: "I'm sorry, but it really wouldn't do for me to return the jewel. I was attacked by a Wildcat who was carrying it."
Ket Shi: "What! You won't give it back? Even though I'm begging you to? What's wrong with you!?"
Olive: "Y-You don't need to get so angry..."
Ket Shi: "Oh! How could I not be angry!?"
Ket Shi: "Even though the Cat's Eye is treasured by all the Wildcats!"
Ket Shi: "Even though they begged me to get it back for them!"
Ket Shi: "This is an incredible emarassment!" (note: actually mispelled in-game)
Ket Shi: "It's a besmirchment of my honor!"
Ket Shi: "How can this be!"
Ket Shi: "You're a demon!"
Ket Shi: "You devil!"
Ket Shi: "You greedy girl!"
Olive: "There's no need to say such things."
Ket Shi: "I don't care. I won't ask you again. Goodbye."
Ket Shi leaves.
Olive: "Oh! The Cat's Eye is gone!"
It looks like Ket Shi has somehow used his magic to steal the Cat's Eye.
If you visit Ket Shi after that with another Cat's Eye gem, events will proceed as if you've never refused him before.
If you say "no deal" again the above script simply repeats.