Jakarta, Singapore: 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 Donald Trump’s election win.
The finance ministry 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 on Tuesday. He said a November research report issued by the bank was not “accurate or credible”.
JPMorgan downgraded Indonesia by two notches to underweight from overweight in a November 13 report as a “tactical response” to the Trump election win. The bank also downgraded Brazil, while noting that both countries may provide a “better buying opportunity” later.
JPMorgan’s business in Indonesia continues to operate as normal, the bank said in an emailed statement on Tuesday. “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 which were previously routed through JPMorgan will now be passed to the government via other banks, according to Bank Indonesia Governor Agus Martowardojo.
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 $2.8 billion of Indonesian stocks and bonds last quarter as investors dumped emerging-market assets following Trump’s victory. That drove the rupiah lower, forcing policymakers to intervene to stabilise the currency.
Banks should take responsibility for economic reports that “could influence fundamentals and psychology”, Finance Minister Sri Mulyani Indrawati said on Tuesday, when asked to comment on the termination of the JPMorgan relationship.
JPMorgan provides investment and commercial banking services to the public and private sectors in Indonesia, according to the bank’s website. It obtained an Indonesian banking licence in 1968 in the name of Chase Manhattan, and opened a branch in Jakarta, followed by a representative office in 1978.