Indonesia’s government said it terminated all business partnerships with JPMorgan Chase & Co after the US bank downgraded its assessment of Southeast Asia’s largest economy following US president-elect Donald Trump’s victory.
The Indonesian Ministry of Finance will stop using JPMorgan as a primary dealer and as an underwriter of its sovereign bonds, Robert Pakpahan, the ministry’s director-general for budget financing and risk management, told reporters in Jakarta yesterday.
He said a November research report issued by the bank was not “accurate or credible.”
JPMorgan downgraded the Southeast Asian state by two notches to underweight from overweight in a Nov. 13 report as a “tactical response” to the Trump election win.
The bank also downgraded Brazil, but said both countries might provide a “better buying opportunity” later.
JPMorgan’s business in Indonesia continues to operate as normal, the bank said in an e-mailed statement yesterday.
“The impact on our clients is minimal and we continue to work with the Ministry of Finance to resolve the matter,” it said.
Any tax payments by Indonesian companies that were previously routed through JPMorgan are now be passed to the government via other banks, Indonesia Governor Agus Martowardojo said.
The government’s action illustrates some of the difficulties in producing balanced research reports, said Alan Richardson, an investment manager at Samsung Asset Management in Hong Kong.
“I don’t think it will affect investor interest in Indonesia, but it does reflect the difficulty of sell-side analysts to provide independent and objective opinions to their clients without upsetting the government officials and regulators,” Richardson said.
Foreign investors sold a net US$2.8 billion of Indonesian stocks and bonds last quarter, dumping emerging-market assets following Trump’s victory. That drove the rupiah lower, forcing policymakers to intervene to stabilize the currency.
Banks should take responsibility for economic reports that “could influence fundamentals and psychology,” Indonesian Minister of Finance Sri Mulyani Indrawati said, when asked to comment on the JPMorgan termination.
JPMorgan provides investment and commercial banking services to the public and private sectors in Indonesia, according to the bank’s Web site. It obtained an Indonesian banking license in 1968 in the name of Chase Manhattan, and opened a branch in Jakarta, followed by a representative office in 1978.
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