The finance ministry in Jakarta has cut all partnerships with U.S. banking giant J.P. Morgan Chase after emerging markets equity strategists at the firm recommended investors reduce their portfolio investment exposure to the biggest economy in Southeast Asia.
In a statement signed by Marwanto Harjowiryono, the Director General of Treasury at the Ministry of Finance, the ministry said the J.P. Morgan report can do damage to Indonesia's financial stability.
In response, according to a report in the Jakarta Globe, the ministry has revoked J.P. Morgan's «perception bank» status with effect from Sunday January 1 2017 and has terminated all its cooperation with the ministry.
The New York headquartered bank has also been an underwriter for Indonesia's government bond sales.
A Partner of 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.
In November J.P. Morgan released a report that double downgraded the country to underweight from overweight, after reading a trend that the benchmark U.S. 10-year treasuries offered more attractive yields, which in turn increased risks of fixed-income investment into emerging market countries such as Indonesia.
Finance Ministry Infuriated
J.P. Morgan had also cut Brazil from overweight to neutral and highlighted Turkey as another emerging market that is highly sensitive to such issue.
However this was the second time in just over a year that Indonesia's finance ministry was infuriated by a J.P. Morgan assessment.
In August 2015, then finance minister Bambang Brodjonegoro issued a strong warning to the investment bank after it published a report amid steep dollar appreciation and currency war concerns in the wake of China's Yuan devaluation.
