Indonesia’s government announced that it would cut the ties with JPMorgan Chase & Co. (NYSE: JPM) after the bank downgraded equities. In the announcement, the finance ministry will stop use the bank as an underwriter and a primary dealer, and said that the report by JP Morgan is not accurate or credible.
The business partnership will be terminated by January 1, and government said that the equity downgrade disturbed the stability of Indonesia’s financial system. On November 13, JP Morgan downgraded Indonesia’s equity by two notches from overweight to underweight. The bank also downgraded Brazil.
“We don’t close ourselves to assessment because it’s important for us to improve ourselves,” said Sri Mulyani, the Finance Minister. “But the institutions with big names have very high responsibility in creating positive psychology instead of doing [something] misleading.”
After the announcement, JP Morgan refused to comment, and it said the effect on clients is extremely small and its business in Indonesia will operate as usual. “We continue to work with the Ministry of Finance to resolve the matter,” said JP Morgan.
“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,” said Alan Richardson, a Samsung Asset Management in Hong Kong.