Indonesia allows JP Morgan to continue business operations

Bloomberg

Indonesia won’t stop JPMorgan Chase & Co. from conducting private-sector business in the country, a finance ministry official said, days after the government severed commercial ties with the US bank for cutting its assessment of the nation’s stocks.
“For business here, JPM is still allowed to operate just like other banks,” Suahasil Nazara, head of the fiscal agency at the finance ministry, told reporters in Jakarta on Wednesday. “The bottom line is that they don’t have a contract with the government.”
The government disagrees with JPMorgan’s assessment of Indonesia’s economy and wants global financial firms to provide more “objective” assessments, Nazara said. The ministry suspended JPMorgan as a primary dealer and underwriter of Indonesia’s bonds from January 1 after the bank downgraded the country’s equities by two notches to underweight in November following Donald Trump’s election win.
JPMorgan continues to operate as normal in Indonesia and is working with the finance ministry to resolve the matter, the New York-based bank said in e-mailed statement on Tuesday.
The biggest US bank was part of an underwriting syndicate when Indonesia sold 3 billion euros ($3.1 billion) of bonds in June. The lender wasn’t listed as a member of syndicates for two more recent offerings denominated in yen and US dollars, according to data compiled by Bloomberg.
The government will find a replacement for JPMorgan as a primary dealer and bond underwriter if needed, Nazara said. “The message to all finance companies is be objective and credible,” he said. “The bigger the institution and reputation, the bigger the responsibility.”
JPMorgan downgraded Indonesia’s equity market 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, while noting that both countries may provide a “better buying opportunity” later.

Tax Payments
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 policy
makers to intervene to stabilize the
currency.
Banks should take responsibility for economic reports that “could influence fundamentals and psychology,” Finance Minister Sri Mulyani Indrawati said 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 license in 1968 in the name of Chase Manhattan, and opened a branch in Jakarta, followed by a representative office in 1978.