The finance ministry has cut all partnerships with JP Morgan Chase after emerging markets equity strategists at the multinational banking and financial services company recommended investors to reduce their portfolio investment exposure in the biggest economy in southeast Asia.
In a statement dated Dec. 9 and signed by Marwanto Harjowiryono, the director general of treasury at the Ministry of Finance, the ministry said the JP Morgan report can do damage to Indonesia’s financial stability.
In response, the ministry has revoked JP Morgan’s “perception bank” status starting Sunday (01/01) and terminated all its cooperation with the ministry.
The perception bank status is awarded to a bank that has been appointed by the finance minister to be a partner of the ministry, providing various banking services including receiving taxation, excise fees and other non-tax revenues.
The New York-based investment banking company has also been a traditional underwriter for Indonesia’s government bond sales.
JP Morgan in November released a report that double downgraded the country to underweight from overweight, after reading a trend that the benchmark US 10-year treasuries offered more attractive yields, which in turn increased risks of fixed-income investment into emerging market countries like Indonesia.
The investment banking company also cut Brazil from overweight to neutral and highlighted Turkey as another emerging market that is highly sensitive to such issue.
This was the second time in just over a year that Indonesia’s finance ministry was infuriated by a JP Morgan assessment.
In August 2015, then finance minister Bambang Brodjonegoro issued a strong warning to the investment bank after it published a report that exacerbated panic in the local financial market amid steep US dollar appreciation and currency war concerns in the wake of China’s yuan devaluation.