Bite the hand that feeds, you are fired! The JP Morgan Chase Case

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Measuring the Strength and Performance of JPMorgan as the Largest Investment Bank
by Sando Sasako
Jakarta, 11 January 2017

Contents

Measuring the Strength and Performance of JPMorgan as the Largest Investment Bank i

Contents i

List of Tables i
List of Figures i

Bite the hand that feeds, you are fired! The JP Morgan Chase Case 1
Primary Dealer System in Indonesia 2
Policy and Politicisation 4
Primary Dealer 4

List of Tables

Table 1 – Top Investment Banking Earners by Product, 2016 1
Table 2 – Daftar 22 primary dealer di Amerika Serikat, 2014 5
Table 3 – Beberapa veteran primary dealer pilihan Bank Sentral Amerika 5
Table 4 – Daftar 19 primary dealer di Indonesia, 2014-2015 6
Table 5 – Largest Investment Banks by Revenue, Jan. 2017 8
Table 6 – Global Investment Banking Ranking, 2015-2016 8
Table 7 – Global M&A Advisor Ranking, 2015-2016 8
Table 8 – Top 10 Global Deals in M&A, 2016 9
Table 9 – Global ECM (Equity Capital Market) Bookrunner Ranking, 2015-2016 9
Table 10 – Global Top 10 Deals in ECM FY 2016 9
Table 11 – Global IPOs Bookrunner Ranking, 2015-2016 10
Table 12 – Global Top 10 Deals in IPO FY 2016 10
Table 13 – Global DCM (Debt Capital Market) Bookrunner Ranking, 2015-2016 10
Table 14 – Global Investment Grade DCM Bookrunner Ranking, 2015-2016 11
Table 15 – Global Top 10 Deals of Investment Grade DCM, 2016 11
Table 16 – Global High Yield DCM Bookrunner Ranking, 2015-2016 11
Table 17 – Global Top 10 Deals in High Yield DCM, 2016 12

List of Figures

Figure 1 – Largest Investment Banks by worldwide activities, 2016 7
Figure 2: Global Investment Banking in Revenues by Sector Ranking, 2016 7


Bite the hand that feeds, you are fired! The JP Morgan Chase Case
by Sando Sasako
Jakarta, 11 January 2017

It is a simple math and logic. Bite the hand that feeds, you are fired! JP Morgan Chase is not immune to such betrayal behaviour. Some can call it subtle, in either positive or negative ways. It was the second bold move of JP Morgan to encourage investors to sell Indonesian securities. In a 13 November 2016 note, the lead analyst Adrian Mowat downgraded JP Morgan’s investment recommendation on Indonesian stocks from overweight to underweight.

The first bold move happened in August 2015, whereas the Finance Minister Bambang Brodjonegoro and Central Bank Governor Agus Martowardojo took no action. Both seemed too afraid for negative consequences by firing JP Morgan. They knew JP Morgan’s position as one of the biggest distributors of Indonesian government bonds overseas, likewise its ‘significance’ in the world’s financial markets.

To see how big JPMorgan is, we can employ the data provided by Dealogic. JPMorgan is the top earner in major investment banking activities, from Equity Capital Markets to Debt Capital Markets, Investment Grade securities, Corporate Bond-Investment-Grade, Corporate Bond-High Yield, Syndicated Lending, Leveraged, and Follow-On.

Table – Top Investment Banking Earners by Product, 2016
Product Revenue $m % cge Y-o-Y Top Bank % share
Investment Grade 2,745.80 22 <0 JPMorgan 13.9
Corporate Bond-High Yield 4,416.00 12 <0 JPMorgan 9.4
Syndicated Lending 14,727.80 5 >0 JPMorgan 9.3
Leveraged 11,982.10 13 >0 JPMorgan 8.3
Follow-On 8,672.50 24 <0 JPMorgan 7.7
Equity Capital Markets 14,036.40 25 <0 JPMorgan 7.6
Debt Capital Markets 21,245.50 6 >0 JPMorgan 6.9
Corporate Bond-Investment-Grade 12,223.90 17 >0 JPMorgan 6.2
Mergers & Acquisitions 24,048.50 1 <0 Goldman Sachs 10.1
IPO 4,074.90 27 <0 Morgan Stanley 6.4
Source: Dealogic Investment Banking Scorecard, http://graphics.wsj.com/investment-banking-scorecard/

Unfortunately, JPMorgan’s second move was deemed to be intolerable, especially by Sri Mulyani Indrawati (SMI). Ranked as one of the most powerful woman in the world by Forbes, the highest one was in 2008, ranked at 23rd, SMI was re-appointed for the second time as the Finance Minister in July 2016.

In 2016, SMI was ranked by Forbes at 37, downed from 31 in 2015, and a bit higher in 2014 which was ranked at 38. She was an executive director at the International Monetary Fund (IMF) for the period of 2002-2004, and one of Managing Directors at the World Bank Group for the period of June 2010-July 2016.

As the Finance Minister, she dares to ditch JPMorgan’s participation in any securities issued by the Government of Indonesia. The last known participation of JPMorgan was the auction plan of SBSN (Surat Berharga Syariah Negara) as of 1 November 2016. It comprised of 3 PBS (Project-Based Sukuk, PBS012-PBS014) series and 1 SPN-S serie (SPN-S 19042017). Totaling at IDR3t, the auction did not include new issuance, but reopening.

At the following auction plan of SUN (Government Securities) dated 6 December 2016, JPMorgan wasnot registered anymore as one of the primary dealers. Totaling at IDR6.2t, the auction comprised of new issuances of 2 SPN series (SPN03170307 and SPN12171207) and the reopening of 3 FR series (FR0061, FR0059, and FR0072). SPN is Indonesian T-Bills.

The exclusion of JPMorgan’s participation was highlighted again in the ‘revised’ 2016 Offering Circular of GoI’s Global Medium Term Note (GMTN). The US$40b GMTN was first offered on 1 December 2015. BofA Merrill Lynch, CIMB, Citigroup, and HSBC were the arrangers. JPMorgan was one of 5 other dealers, that is ANZ, Barclays, Deutsche Bank, Standard Chartered Bank, and Société Générale (Corporate and Investment Banking). Arrangers also function as the dealers.

The participation of JPMorgan remained intact at the Supplemental Offering Circular issued on 7 June 2016. Dated 1 December 2016, the revised OC eliminated JPMorgan’s participation. Some other revisions include an increase of value by US$10b and addition of other investment banks such as BNP Paribas, Goldman Sachs, and UBS.

The dismissal of JP Morgan Chase case as the lead underwriter and primary dealer of Indonesian government debt securities is not barely new. Similar cases have already happened in the past. Recall the cases of Morgan Stanley (MS.N) in Singapore (2006) and China; Goldman Sachs Group Inc (GS.N) in South Korea’s Kookmin Bank [KOOKM.UL] in 2008; Banco Santander (SAN.MC) in Brazil (2014); HSBC in Hong Kong (2014).

What JPMorgan has lost is not limited to its function as the primary dealer, but also its status as the perception bank, the highly respected bank in Indonesian banking industry structure. JPMorgan also lost its function as the receiving bank of state revenue not related to imports, including tax, onshore excise, non-tax revenue, and penalty payments in regard to the tax amnesty programme.

Primary Dealer System in Indonesia

Prior to 2006, Indonesia barely knew the ‘primary dealer system’. Three years before, in 2003, Amone and Iden had assessed that Indonesia for somehow had applied some kind of PDS. The following is their assessment.

1. Dealers in government securities
So far, there are no dealers for government securities, just 14 brokers (7 brokers for capital markets and 7 brokers for money markets). However, these brokers are only for the central bank securities transactions called Sertifikat Bank Indonesia (SBI).

2. PD institutions
No primary dealers (PD) system.

3. System evolution over time
In 1993, primary dealers were needed to help develop the SBI secondary market. As the SBI secondary market developed, the primary dealer system was seen as unnecessary and therefore discontinued in 1998. Access to SBI was then opened to all market participants, i.e., banks, brokers, and individuals. The new regulation on SBI auction, which will be effective in October 2002, states that only banks and brokers have access to the SBI primary market.

4. Relation between the size of public debt and the desirability of PDs
The need for primary dealers may become imminent should the government issue treasury bills and government bonds under the new Government Securities Law passed by the Parliament in September 2002. Currently, the only existing government bonds are recapitalization bonds issued to finance the cost of the government’s financial participation in commercial banks as part of the national program to restructure and revitalize the hanking sector. Recapitalization bonds were issued through private placements.

5. Recommendation of system
Strongly recommended at Indonesia’s current development stage, i.e., the middle stage. The growth of Indonesia’s equity and debt market and the passage of the Government Securities Law will make the need for primary dealer system imminent. Market supporting infrastructure has also been developed. Indonesia already owns two stock exchanges, i.e., the Jakarta Stock Exchange and the Surabaya Stock exchange, a fund transfer system called the Real-Time Gross Settlement (Bl-RTGS), and a Government Bond Settlement system called BI-SKRIP. Both the BI-RTGS and the BI-SKRIP are operated by the Central Bank, Bank of Indonesia. Based on this infrastructure and a Scripless Securities Settlement System currently being developed by Bank Indonesia, the Ministry of Finance and Bank Indonesia are developing a secondary market for government securities.

6. Advantages
PDs can develop a secondary market for government bonds and create market liquidity.

7. Disadvantages
A minor disadvantage might be that with primary dealers, the price of a trade might not reflect the market price, so not many participants would do securities transactions. The price seems determined only by primary dealers.

The primary dealer system in Indonesia was set in the Regulations of Finance Minister (Permenkeu).
1. Permenkeu No.144/PMK.08/2006 regarding Primary Dealer System
2. Permenkeu No.108/PMK.08/2007 regarding Primary Dealer System
3. Permenkeu No.30/PMK.08/2008 amended Permenkeu No.108/PMK.08/2007
4. Permenkeu No.134/PMK.08/2013 regarding Primary Dealer
5. Permenkeu No.199/PMK.08/2015, the First Amendment of Permenkeu No.134/PMK.08/2013
6. Permenkeu No.234/PMK.08/2016, the Second Amendment of Permenkeu No.134/PMK.08/2013
7. Permenkeu No…./PMK.08/2017, the Third Amendment of Permenkeu No.134/PMK.08/2013

Although PDS had been implemented following the issuance of Permenkeu No.144/PMK.08/2006, the first participation of JPMorgan as the one of Indonesian primary dealer appeared on the auction of government bonds dated 30 October 2007. The PDS initiation and first implementation was set by SMI while she was the Finance Minister, the first time ever.

The first participation of JPMorgan was to replace PT Bank DBS Indonesia in the auction of government bonds dated 30 October 2007. Worth IDR3t, the auction comprised of 2 FR series, that is FR0047 and FR0048. Both series were reopening issues. The auction system was operated by Bank Indonesia. Multiple price is offered in competitive (80%) or non-competitive bids (20%).

On 28 August 2007 auction, the IDR3t bonds offered from FR0047 and ZC0001 series. JPMorgan was not registered as one of the primary dealers. Likewise on 28 September 2007 auction, where the IDR1t bonds offered were from ZC0002 series.

The other 17 primary dealers were Bahana Securities; Bank Central Asia Tbk (BCA); Bank Danamon Indonesia Tbk; Bank Internasional Indonesia Tbk (BII); Bank Lippo Tbk; Bank Mandiri (Persero), Tbk; Bank Negara Indonesia (Persero) Tbk (BNI); Bank Panin Tbk; Bank Permata Tbk; Bank Rakyat Indonesia Tbk (BRI); Citibank N.A.; Danareksa Sekuritas; Deutsche Bank AG; HSBC; Mandiri Sekuritas; Standard Chartered Bank; and Trimegah Securities Tbk.

The following is what I had written in my book titled by “Krisis Finansil Cina: Perspektif Kebijakan Moneter, Corporate Finance (Analisa Laporan Keuangan), dan Investment Banking (Valuasi Nilai)”, published in March 2016. ISBN 978-602-73508-5-4.

Policy and Politicisation

Banyak politisi, pengamat politik, ahli di bidang komunikasi politik beralih peran dan profesi menjadi kusir yang sering berdebat satu sama lain untuk hal-hal yang nyeleneh dan tidak perlu. Objek yang diperdebatkan pun biasanya terkait masalah pelanggaran etika, tata tertib, prosedur, dan segala hal terkait nilai dan norma.

Kusir sebagai penunggang kereta kuda memang doyan menjadi bunglon yang sangat mudah berubah warna ketika tempat berpijaknya berbeda warna (situasi dan kondisi berubah). Tidak jarang pula mereka sering menunggangi kepentingan terselubung dalam implementasi dan eksekusi berbagai agenda.

Wujudnya sangat jelas terartikulasi dalam setiap kata dan ucapan serta perbuatan yang sangat penuh propaganda. Penunggang gelap, penumpang gelap, free rider. Dalam kalimat yang sederhana, mereka merupakan salah satu pihak yang pasti berpotensi mendapat untung dan diuntungkan bila propaganda mereka bisa diwujudkan. Just follow the money.

Di sisi lain, pasti ada pihak yang buntung dan dibuntungkan sebagai tumbal dan menjadi korban dan dikorbankan. Beberapa korban bersifat pasif. Ada pula yang reaktif dan aktif. Beberapa pihak yang reaktif karena merasa dikorbankan akan memberi perlawanan. Reaksi paling minimum berupa pengingkaran atas dasar logika, kata hati, dan/atau perasaan.

Beberapa reaksi diaktualisasi dalam bentuk ucapan (curhat atau curcol) ke peer group yang tidak hostile, melainkan memberikan perlindungan dan menawarkan comfort zone. Beberapa reaksi diaktualisasi dalam bentuk penggalangan kekuatan, minimal dalam bentuk moral. Beberapa reaksi diaktualisasi dalam bentuk pengumpulan massa, terorganisir dan tidak.

Salah satu bentuk telah terorganisirnya suatu massa adalah telah terkumpulnya dana secara rutin dan/atau melalui upaya penggalangan dana (fund raising) yang sifatnya temporer dan/atau regional. Massa yang terorganisir pun biasanya mengalami pengerucutan pada segelintir kelompok kunci dan kelompok inti.

Primary Dealer

Di dunia finansil, kelompok inti ini biasa disebut Primary Dealer. Di AS, mereka mendapat fasilitas kredit yang nilainya fantastis dan berbagai akses non-finansil lainnya yang memiliki nilai moneter jauh lebih besar dari nilai fasilitas kredit yang mereka terima. Di tahun 2014, 22 investment banking dipilih sebagai dealer utama dan kepanjangan tangan The Fed di pasar finansil dunia.

Dua diantaranya merupakan pemain baru, yakni Jefferies LLC yang baru bergabung sejak Maret 2013 dan TD Securities (USA) LLC sejak Februari 2011. Jefferies LLC merupakan pengganti Jefferies & Co., Inc. yang menjadi dealer utama selama periode Juni 2009 sampai Februari 2013. Pemain lama sebelum tahun 2000 tersisa 2 institusi, yakni Goldman, Sachs & Co. (Des. 1974) dan HSBC Securities (USA) Inc. (Juni 1999).

Tabel – Daftar 22 primary dealer di Amerika Serikat, 2014
1. Bank of Nova Scotia, New York Agency
2. Barclays Capital Inc.
3. BMO Capital Markets Corp.
4. BNP Paribas Securities Corp.
5. Cantor Fitzgerald & Co.
6. Citigroup Global Markets Inc.
7. Credit Suisse Securities (Usa) LLC
8. Daiwa Capital Markets America Inc.
9. Deutsche Bank Securities Inc.
10. Goldman, Sachs & Co.
11. HSBC Securities (USA) Inc.
12. Jefferies LLC
13. J.P. Morgan Securities LLC
14. Merrill Lynch, Pierce, Fenner & Smith Inc.
15. Mizuho Securities USA Inc.
16. Morgan Stanley & Co. LLC
17. Nomura Securities International, Inc.
18. RBC Capital Markets, LLC
19. RBS Securities Inc.
20. SG Americas Securities, LLC
21. TD Securities (Usa) LLC
22. UBS Securities LLC.
Sumber: The Fed

 


Tabel – Beberapa veteran primary dealer pilihan Bank Sentral Amerika
Nama bank investasi Mulai Akhir
J.P.Morgan Securities, Inc. 1960-05-19 2001-04-30
Merrill Lynch Government Sec. Inc. 1960-05-19 2009-02-11
Citibank 1961-06-15 1989-04-13
Chase Manhattan Gov’t Securities 1970-07-15 1987-06-30
Bank of America NT & SA 1971-11-17 1994-04-15
Morgan Stanley & Co. Incorporated 1978-02-01 2011-05-31
Sumber: The Fed

Di Indonesia, di tahun 2007, 18 primary dealer atau agen utama perdagangan Surat Utang Negara (SUN) terdiri dari 14 bank dan 4 perusahaan efek. Lippo Bank yang pernah berjaya dan penuh dengan skandal akhirnya dilebur ke Bank Niaga pada pertengahan Juli 2008. Eksekusi peleburan dilakukan efektif per 1 Oktober 2008 dan diharapkan selesai pada kuartal keempat di tahun 2009. Statusnya sebagai primary dealer beralih ke PT Bank CIMB Niaga Tbk sebagai institusi hasil peleburan.

Di tahun 2014, Bank DBS Indonesia tidak lagi menjadi primary dealer. Jumlah primary dealer pun bertambah menjadi 19. Dua bank lainnya mencakup PT Bank OCBC NISP, Tbk dan JP Morgan Chase Bank NA. JP Morgan Chase (JPMC) telah operasional di Jakarta sejak 17 Juni 1968 dengan nama The Chase Manhattan Bank, N.A (CMB).

Di bulan Desember 1995, Chemical Banking Corp membeli Chase Manhattan Bank, N.A. tetapi tetap memakai nama Chase Manhattan Corp (CMC), induk perusahaan Chase Manhattan Bank. Di bulan Mei 2000, CMC New York mengakuisisi 91,72% saham Robert Fleming Holding Ltd, termasuk afiliasi RFH di Indonesia, yakni PT Jardine Fleming Nusantara.

Di akhir 2000, CMC bergabung dengan JPMorgan & Co. menjadi JPMorgan Chase & Co. Anak perusahaan dari kedua perusahaan induk itu pun melebur juga. Morgan Guaranty Trust Co NY melebur ke CMB menjadi JP Morgan Chase Bank. Di awal 2004, Bank One Corp (BOC) melebur ke JPMC menjadi JP Morgan Chase Bank, NA (National Association).

Menurut Rahmat Waluyanto, fungsi terpenting dari primary dealer ini adalah menjadi penggerak pasar atau market makers di pasar sekunder. Dealer ini diberikan hak akses eksklusif sebagai peserta lelang di pasar perdana dan sekunder, hak eksklusif untuk mendapatkan informasi pertama tentang program pengelolaan SUN oleh pemerintah.

Di sisi lain, dealer wajib menyerap SUN di pasar perdana, memperdagangkan seri SUN yang sudah ditetapkan pemerintah sebagai benchmark, membuat kuotasi harga dua arah atau bid-offer dengan kisaran spread tertentu. Pemerintah juga menyediakan fasilitas securities lending kepada dealer utama untuk menjamin likuiditas pasar.

Sejak akhir Agustus 2005, Bloomberg ditetapkan sebagai platform resmi untuk perdagangan obligasi primer di Indonesia. Platform fixed income electronic trading (FIET) mulai digunakan sejak awal kuartal keempat di tahun 2005. Volume rata-rata harian perdagangan obligasi pemerintah Indonesia bernilai Rp 2,1 trilyun, atau setara dengan $200 juta.

Tabel – Daftar 19 primary dealer di Indonesia, 2014-2015
1. Citibank N.A
2. Deutche Bank AG
3. HSBC
4. Bank Central Asia, Tbk., PT
5. Bank Danamon Indonesia, Tbk, PT
6. Bank Internasional Indonesia, Tbk., PT
7. Bank Mandiri (Persero), Tbk., PT
8. Bank Negara Indonesia (persero), Tbk., PT
9. Bank Panin, Tbk., PT
10. Bank OCBC NISP, Tbk, PT
11. Bank Rakyat Indonesia, Tbk., PT
12. Bank Permata, Tbk., PT
13. Bank CIMB Niaga, Tbk., PT
14. Standard Chartered Bank
15. JP Morgan Chase Bank NA.
16. Bahana Securities, PT
17. Danareksa Sekuritas, PT
18. Mandiri Sekuritas, PT
19. Trimegah Securities, Tbk., PT

 
ft-top-banks
Figure – Largest Investment Banks by worldwide activities, 2016
Source: Financial Times, https://markets.ft.com/data/league-tables/tables-and-trends

 


 
global-ib-sector-banking-2016
Figure: Global Investment Banking in Revenues by Sector Ranking, 2016
Source: Dealogic Investment Banking Scorecard, http://graphics.wsj.com/investment-banking-scorecard/

 

Table – Largest Investment Banks by Revenue, Jan. 2017
Bank Rev Share DCM ECM Loans M&A
$m % (% of Rev) (% of Rev) (% of Rev) (% of Rev)
JPMorgan 5,920 8 25% 23% 18% 34%
Goldman Sachs 4,888 6.6 21% 13% 16% 50%
Bank of America Merrill Lynch 4,463 6.1 31% 28% 14% 26%
Morgan Stanley 4,205 5.7 24% 10% 20% 46%
Citi 3,597 4.9 34% 20% 17% 29%
Credit Suisse 3,175 4.3 21% 29% 18% 32%
Barclays 3,099 4.2 32% 25% 12% 31%
Deutsche Bank 2,674 3.6 32% 28% 17% 23%
Wells Fargo Securities 1,825 2.5 43% 28% 12% 17%
UBS 1,637 2.2 28% 12% 22% 38%
RBC Capital Markets 1,610 2.2 29% 28% 19% 24%
HSBC 1,295 1.8 58% 24% 8% 10%
BNP Paribas 1,080 1.5 45% 29% 9% 16%
Jefferies LLC 1,032 1.4 7% 23% 16% 54%
Mizuho 999 1.4 45% 28% 19% 8%
Lazard 933 1.3 0% 0% 0% 100%
Nomura 841 1.1 25% 13% 30% 31%
Evercore Partners Inc 792 1.1 0% 0% 4% 96%
BMO Capital Markets 671 0.9 20% 29% 30% 21%
Mitsubishi UFJ Financial Group 661 0.9 44% 49% 6% 2%
Subtotal 45,397 61.5 28% 21% 16% 34%
Total 73,766 100 29% 20% 19% 33%
Source:Dealogic, http://fn.dealogic.com/fn/IBRank.htm

 

Table – Global Investment Banking Ranking, 2015-2016
Bank FY 2016 FY 2015
Revenue $m % share Rank Revenue $m % share
JPMorgan 5,957.10 8 1 6,069.90 7.9
Goldman Sachs 4,871.50 6.6 2 5,534.20 7.2
BofA Merrill Lynch 4,483.10 6.1 3 4,830.40 6.3
Morgan Stanley 4,235.50 5.7 4 4,610.90 6
Citi 3,590.40 4.8 5 3,916.00 5.1
Credit Suisse 3,144.10 4.2 7 3,171.10 4.1
Barclays 3,090.10 4.2 8 3,120.00 4
Deutsche Bank 2,707.00 3.7 6 3,366.70 4.4
Wells Fargo Securities 1,819.70 2.5 10 1,792.20 2.3
UBS 1,648.60 2.2 9 1,975.80 2.6
Subtotal 35,547.20 48 38,387.00 49.8
Total 74,058.30 100 77,140.10 100
Source: Dealogic Investment Banking Scorecard, http://graphics.wsj.com/investment-banking-scorecard/

 

Table – Global M&A Advisor Ranking, 2015-2016
Advisor FY 2016 FY 2015
Value $bn # Rank Value $bn #
Goldman Sachs 986.6 326 1 1,562.50 404
Morgan Stanley 929.5 298 2 1,245.30 372
JPMorgan 832.5 340 3 1,216.80 339
BofA Merrill Lynch 801.3 250 4 1,034.70 250
Citi 593.3 238 5 799 283
Credit Suisse 549.4 238 6 711.9 210
Barclays 527.3 203 8 646.8 197
UBS 387.3 178 10 437.3 187
Lazard 352.6 249 7 709.5 249
Deutsche Bank 349 149 9 609.2 226
Source: Dealogic Investment Banking Scorecard, http://graphics.wsj.com/investment-banking-scorecard/

 

Table – Top 10 Global Deals in M&A, 2016
Acquiror Target Announced Value $m Value $m
(ex-debt)
AT&T Inc Time Warner Inc 22-Oct 107,887.80 85,724.80
Bayer AG Monsanto Co 23-May 66,340.60 56,969.60
British American Tobacco plc – BAT Reynolds American Inc 21-Oct 58,072.70 46,852.70
China National Chemical Corp – ChemChina Syngenta AG 03-Feb 46,940.50 44,341.80
Qualcomm Inc NXP Semiconductors NV 27-Oct 46,990.10 39,177.10
Praxair Inc Linde AG 20-Dec 42,503.20 34,977.20
General Electric Co Baker Hughes Inc 31-Oct 32,202.00 32,202.00
SoftBank Group Corp ARM Holdings plc 18-Jul 31,645.00 31,645.00
Enbridge Inc Spectra Energy Corp 06-Sep 42,962.10 28,443.10
Microsoft Corp LinkedIn Corp 13-Jun 28,119.90 28,119.90
Source: Dealogic Investment Banking Scorecard, http://graphics.wsj.com/investment-banking-scorecard/

 

Table – Global ECM (Equity Capital Market) Bookrunner Ranking, 2015-2016
Bookrunner FY 2016 FY 2015
Value $bn # Rank Value $bn #
JPMorgan 57.43 343 3 65.84 387
Goldman Sachs 48.82 274 1 72.62 342
Morgan Stanley 48.01 270 2 67.5 387
Citi 34.51 257 6 47.41 305
BofA Merrill Lynch 34 225 4 53.73 318
Credit Suisse 31.31 231 7 44.62 295
Deutsche Bank 30.14 168 8 41.94 243
UBS 24.33 194 5 53.33 267
Barclays 21.11 151 9 32.95 213
CITIC Securities 17.8 76 10 17.96 71
Subtotal 347.45 1,250 497.87 1,463
Total 724.73 5,302 913.09 5,555
Source: Dealogic Investment Banking Scorecard, http://graphics.wsj.com/investment-banking-scorecard/

 

Table – Global Top 10 Deals in ECM FY 2016
Priced Type Issuer Value $m Exchange
21-Sep IPO Postal Savings Bank of China Co Ltd 7,625.30 Hong Kong
01-Jun CONV SoftBank Group Corp (Mandatory Exchangeable Trust) 6,600.00 New York
06-Oct IPO innogy SE 5,204.30 Frankfurt Prime
16-Nov CONV Bayer Capital Corp BV 4,300.80 Frankfurt Prime
17-Oct IPO JR Kyushu 3,993.60 Tokyo
11-Feb FO Saipem SpA 3,944.30 Milan
15-Apr FO China Yangtze Power Co Ltd 3,733.80 Shanghai
07-Oct FO Air Liquide SA 3,672.50 Paris
17-Mar FO TransCanada Corp 3,315.00 Toronto
04-Apr FO ArcelorMittal SA 3,163.80 Amsterdam, Luxembourg, New York
Source: Dealogic Investment Banking Scorecard, http://graphics.wsj.com/investment-banking-scorecard/

 

Table – Global IPOs Bookrunner Ranking, 2015-2016
Bookrunner FY 2016 FY 2015
Value $bn # Rank Value $bn #
JPMorgan 8.55 67 3 9.82 73
Morgan Stanley 8.17 61 1 14.35 91
Goldman Sachs 6.46 55 2 11.12 87
Citi 6.38 65 6 9.1 81
Deutsche Bank 5.66 50 5 9.11 72
Credit Suisse 5.28 52 8 5.94 65
BofA Merrill Lynch 4.83 43 7 8.81 70
UBS 4.36 35 4 9.48 57
Nomura 3.42 30 11 3.57 43
China Securities Co Ltd 3.34 19 53 0.78 9
Subtotal 56.46 226 82.07 304
Total 135.78 1,149 194.27 1,304
Source: Dealogic Investment Banking Scorecard, http://graphics.wsj.com/investment-banking-scorecard/

 

Table – Global Top 10 Deals in IPO FY 2016
Priced Type Issuer Value $m Exchange
21-Sep IPO Postal Savings Bank of China Co Ltd 7,625.30 Hong Kong
06-Oct IPO innogy SE 5,204.30 Frankfurt Prime
17-Oct IPO JR Kyushu 3,993.60 Tokyo
09-Jun IPO Dong Energy A/S 3,006.10 Copenhagen
23-Sep IPO Nets A/S 2,356.40 Copenhagen
28-Oct IPO Samsung BioLogics Co Ltd 1,968.50 Korea
21-Oct IPO China Resources Pharmaceutical Group Ltd 1,941.40 Hong Kong
26-Oct IPO ConvaTec Group plc 1,939.10 London
21-Mar IPO China Zheshang Bank Co Ltd 1,937.80 Hong Kong
11-Oct IPO Bank of Shanghai Co Ltd 1,598.80 Shanghai
Source: Dealogic Investment Banking Scorecard, http://graphics.wsj.com/investment-banking-scorecard/

 

Table – Global DCM (Debt Capital Market) Bookrunner Ranking, 2015-2016
Bookrunner FY 2016 FY 2015
Value $bn # Rank Value $bn #
JPMorgan 433.7 2,139 1 412.34 1,831
Citi 409.01 1,940 3 366.4 1,668
BofA Merrill Lynch 388.59 1,914 2 376.11 1,674
Barclays 340.35 1,343 4 345.82 1,329
Goldman Sachs 299.9 1,274 7 273.82 1,094
Morgan Stanley 281.93 1,782 6 274.26 1,811
HSBC 273.2 1,229 8 241.51 1,192
Deutsche Bank 257.15 1,096 5 276.16 1,295
Wells Fargo Securities 247.59 1,717 10 216.2 1,534
BNP Paribas 172.36 735 11 148.56 702
Subtotal 3,103.80 9,475 2,931.20 8,696
Total 6,701.40 25,072 6,136.20 21,729
Source: Dealogic Investment Banking Scorecard, http://graphics.wsj.com/investment-banking-scorecard/

 

Table – Global Investment Grade DCM Bookrunner Ranking, 2015-2016
Bookrunner FY 2016 FY 2015
Value $bn # Rank Value $bn #
JPMorgan 201.14 732 1 213.49 792
BofA Merrill Lynch 190.49 729 2 197.73 724
Citi 183.74 830 3 175.47 777
Morgan Stanley 162.76 701 4 155.46 665
Goldman Sachs 145.03 621 5 151.5 579
HSBC 133.62 567 8 114 550
Barclays 117.2 426 6 123.84 506
Deutsche Bank 113.64 386 7 123.09 479
Wells Fargo Securities 103.46 422 9 98.96 365
BNP Paribas 84.33 389 12 73.73 367
Subtotal 1,435.40 3,210 1,427.30 3,251
Total 3,265.10 10,356 3,011.30 9,181
Source: Dealogic Investment Banking Scorecard, http://graphics.wsj.com/investment-banking-scorecard/

 

Table – Global Top 10 Deals of Investment Grade DCM, 2016
Priced Issuer Value $m Sector Nationality
13-Jan Anheuser-Busch InBev Finance Inc 46,000 FOOD BEL
17-May Dell Inc 20,000 TECH USA
01-Aug Microsoft Corp 19,750 TECH USA
17-Nov Abbott Laboratories 15,100 HEAL USA
18-Jul Teva Pharmaceutical Finance Netherlands III BV 15,000 HEAL ISR
16-Mar Anheuser-Busch InBev SA/NV 14,748 FOOD BEL
29-Jun Oracle Corp 14,000 TECH USA
02-Jun Aetna Inc 13,000 HEAL USA
19-Sep Shire Acquisitions Investments Ireland DAC 12,100 HEAL GBR
16-Feb Apple Inc 12,000 TECH USA
Source: Dealogic Investment Banking Scorecard, http://graphics.wsj.com/investment-banking-scorecard/

 


 

Table – Global High Yield DCM Bookrunner Ranking, 2015-2016
Bookrunner FY 2016 FY 2015
Value $bn # Rank Value $bn #
JPMorgan 32.2 263 1 37.57 241
BofA Merrill Lynch 28.24 209 3 30.23 219
Goldman Sachs 27.83 181 4 29.65 189
Deutsche Bank 27.33 186 2 30.33 197
Barclays 25.86 174 6 23.8 165
Citi 25.78 191 5 25.82 170
Credit Suisse 21.08 163 7 22.78 149
Morgan Stanley 14.15 137 8 22.13 145
Wells Fargo Securities 13.34 115 10 14.2 124
RBC Capital Markets 10.72 111 9 14.49 108
Subtotal 226.5 530 251 534
Total 339.7 655 371.6 671
Source: Dealogic Investment Banking Scorecard, http://graphics.wsj.com/investment-banking-scorecard/

 


Table – Global Top 10 Deals in High Yield DCM, 2016
Priced Issuer Value $m Sector Nationality
17-May Petrobras Global Finance BV 6,750 OILG BRA
30-Mar Western Digital Corp 5,225 TECH USA
06-Apr Numericable-SFR 5,190 TELE NLD
29-Apr Ardagh Packaging Finance plc 4,496 CPRO IRL
08-Sep Schaeffler Verwaltung Zwei GmbH 4,030 MACH DEU
16-Sep Ziggo Secured Finance BV 3,496 TELE GBR
08-Jun EMC Corp 3,250 TECH USA
20-Apr Prime Security Services Borrower LLC 3,140 SERV USA
07-Jul Petrobras Global Finance BV 3,000 OILG BRA
13-Jun Reynolds Group Issuer LLC 2,900 FRES NZL
Source: Dealogic Investment Banking Scorecard, http://graphics.wsj.com/investment-banking-scorecard/


Pokok-Pokok Perubahan Peraturan Menteri Keuangan tentang Dealer Utama
Jakarta, 11 Januari 2017

Sebagai tindak lanjut atas pelaksanaan evaluasi Dealer Utama serta dalam rangka meningkatkan efektivitas Dealer Utama berdasarkan tata kelola yang baik, Kementerian Keuangan melakukan perubahan peraturan atas Peraturan Menteri Keuangan (PMK) Nomor 134/PMK.08/2013 tentang Dealer Utama sebagaimana telah diubah dengan PMK Nomor 199/PMKD8/2015. Perubahan selanjutnya terhadap peraturan dimaksud tertuang dalam
PMK Nomor 234/PMK.08/2016 tentang Perubahan Kedua atas PMK Nomor 134/PMK.08/2013 tentang Dealer Utama.

Adapun pokok-pokok materi perubahan PMK tersebut antara lain memuat :
1. Pasal 5 menyatakan kewenangan Menteri Keuangan c.q. Direktur Jenderal Pengelolaan Pembiayaan dan Risiko untuk menerima atau menolak permohonan Bank atau Perusahaan Efek menjadi Dealer Utama dengan mempertimbangan rekam jejak Bank atau Perusahaan Efek yang mengajukan permohonan sebagai calon Dealer Utama, termasuk pengalaman bekerja sama dengan Kementerian Keuangan, dan/atau efektifitas penerapan sistem Dealer Utama;

2. Pasal 5A menerangkan apabila Dealer Utama melakukan merger, akuisisi, konsolidasi, integrasi dan/atau bentuk restrukturisasi/reorganisasi lainnya, maka Dealer Utama menyampaikan pemberitahuan kepada Menteri Keuangan untuk dapat ditunjuk kembali menjadi Dealer Utama sepanjang tidak terdapat perubahan terkait pemenuhan persyaratan sebagai Dealer Utama;

3. Pasal 7A menegaskan kewajiban Dealer Utama untuk menjaga hubungan kemitraan dengan Pemerintah Rl yang berlandaskan pada asas profesionalitas, integritas, penghindaran benturan kepentingan dan memperhatikan kepentingan NKRl;

4. Pengecualian diberlakukan terhadap Surat Perbendaharaan Negara tenor 3 (tiga) bulan dalam perhitungan kewajiban aktivitas Dealer Utama pada lelang SUN di pasar perdana termaktub dalam Pasal 7B.

Dengan penyempurnaan peraturan Dealer Utama tersebut diharapkan peran Dealer Utama dalam pengembangan pasar Surat Utang Negara semakin efektif dan meningkat, termasuk dalam peningkatan likuiditas, efisiensi dan transparansi di pasar sekunder Surat Utang Negara.

Kepala Biro Komunikasi dan Layanan Informasi
Sekretariat Jenderal
Kementerian Keuangan Republik Indonesia
Nufransa Wira Sakti
NIP 197008111995031002


Indonesian Primary Dealers, 1 September 2016
1. Citibank N.A.
2. Deutsche Bank AG
3. HSBC
4. PT Bank ANZ Indonesia
5. PT Bank Central Asia, Tbk.
6. PT Bank Danamon Indonesia, Tbk.
7. PT Bank Intemasional Indonesia, Tbk.
8. PT Bank Mandiri (Persero), Tbk.
9. PT Bank Negara Indonesia (Persero), Tbk.
10. PT Bank OCBC NISP, Tbk.
11. PT Bank Panin, Tbk.
12. PT Bank Rakyat Indonesia, Tbk.
13. PT Bank Permata, Tbk.
14. PT Bank CIMB Niaga Tbk.
15. Standard Chartered Bank
16. JPMorgan Chase Bank NA.
17. PT. Bahana Securities
18. PT. Danareksa Sekuritas
19. PT. Mandiri Sekuritas
20. PT. Trimegah Securities, Tbk.


Bite the hand that feeds
http://idioms.thefreedictionary.com/bite+the+hand+that+feeds

to severely criticize the person or organization that helps you or pays you It is unwise to bite the hand that feeds you, but TV journalists need to tell the truth about the news business.
Cambridge Dictionary of American Idioms Copyright © Cambridge University Press 2003.

to treat someone badly who has helped you in some way, often someone who has provided you with money Leaving the company after they’ve spent three years training you up – it’s a bit like biting the hand that feeds you.
Cambridge Idioms Dictionary, 2nd ed. Copyright © Cambridge University Press 2006.

To repay generosity or kindness with ingratitude and injury.
American Heritage® Dictionary of the English Language, Fifth Edition. Copyright © 2016 by Houghton Mifflin Harcourt Publishing Company. Published by Houghton Mifflin Harcourt Publishing Company.


bite the hand that feeds
http://www.urbandictionary.com/define.php?term=Bite%20the%20hand%20that%20feeds%20you

1: Turn on someone that has supported you.
2: Turn against a benefactor, a friend or a supporter.
3: Repay support with wrong.

Don’t bite the hand that feeds you. You may need that hand one day.
by Mr. Terrence L. Trezvant September 28, 2005


don’t bite the hand that feeds you
http://idioms.thefreedictionary.com/don’t+bite+the+hand+that+feeds

Do not scorn or treat ill those on whom one depends or derives benefit, for to do so is to risk losing those benefits altogether. You might not agree with your parents’ rules, but don’t bite the hand that feeds you, because you owe everything you have to them. In politics, you learn quickly not to bite the hand that feeds, because benefactors can just as quickly crush your political future.
Farlex Dictionary of Idioms. © 2015 Farlex, Inc.


Don’t Feed the Hand That Bites you
http://www.urbandictionary.com/define.php?term=Don%E2%80%99t%20Feed%20the%20Hand%20That%20Bites%20you

Don’t help someone who will try and harm or harass you.
Like being nice villagers in remote country who then attack you and as it suits them to receive aid and simultaneously fight you.
I told him Don’t Feed the Hand That Bites you as he was trying to to get on the good side of his upstairs neighbor that promptly dumped coffee on his laundry.
by fonty July 10, 2010



Indonesian Primary Dealers, 13 October 2016

C. Bank of Indonesia (Bl)
B. Deposit Insurance Corporation (LPS)
A. Primary Dealers
1. Citibank N.A.
2. Deutsche Bank AG
3. HSBC
4. PT Bank Central Asia, Tbk.
5. PT Bank Danamon Indonesia, Tbk.
6. PT Bank Intemasional Indonesia, Tbk.
7. PT Bank Mandiri (Persero), Tbk.
8. PT Bank Negara Indonesia (Persero), Tbk.
9. PT Bank OCBC NISP, Tbk.
10. PT Bank Panin, Tbk.
11. PT Bank Rakyat Indonesia, Tbk.
12. PT Bank Permata, Tbk.
13. PT Bank CIMB Niaga Tbk.
14. Standard Chartered Bank
15. JPMorgan Chase Bank NA.
16. PT. Bahana Securities
17. PT. Danareksa Sekuritas
18. PT. Mandiri Sekuritas
19. PT. Trimegah Securities, Tbk.


ORI Sellers No.013- Banks
Bank ANZ Indonesia
Bank Bukopin
Bank Central Asia
Bank CIMB Niaga
Citibank, N.A.
Bank Danamon Indonesia
Bank DBS Indonesia
HSBC
Bank Maybank Indonesia
Bank Mega
Bank Negara Indonesia
Bank OCBC NISP
Bank Panin
Bank Permata
Bank Rakyat Indonesia
Standard Chartered Bank
Bank Tabungan Negara
Bank Mandiri

ORI Sellers No.013- Securities Companies
Danareksa Sekuritas
Indo Premier Securities
Mega Capital Indonesia
MNC Securities
Sucorinvest Central Gani
Trimegah Sekuritas Indonesia


Primary Dealers of SBSN
C. Bank of Indonesia (Bl)
B. Deposit Insurance Corporation (LPS)
A. Primary Dealers
1. Citibank N.A.
2. Deutsche Bank AG
3. PT. Bank BNP Paribas Indonesia
4. PT Bank Central Asia, Tbk.
5. PT Bank CIMB Niaga Tbk.
6. PT Bank Mandiri (Persero), Tbk.
7. PT. Bank Maybank Indonesia, Tbk
8. PT Bank Negara Indonesia (Persero), Tbk.
9. PT Bank OCBC NISP, Tbk.
10. PT Bank Panin, Tbk.
11. PT Bank Permata, Tbk.
12. PT Bank Rakyat Indonesia, Tbk.
13. Standard Chartered Bank
14. HSBC
15. PT. Bank BRISyariah
16. PT. Bank Negara Indonesia Syariah
17. PT. Bank Syariah Mandiri
18. PT. Bahana Securities
19. PT. Danareksa Sekuritas
20. PT. Mandiri Sekuritas
21. PT. Trimegah Securities, Tbk.


http://blogs.barrons.com/asiastocks/2016/11/13/trumped-why-sell-indonesia-now/
Indonesia: Why JPMorgan Has Moved To Underweight
By Shuli Ren, November 13, 2016, 11:37 P.M. ET

JPMorgan’s emerging markets equity strategists shuffled their portfolio allocation over the weekend, downgrading Brazil from Overweight to Neutral, double downgrading Indonesia from Overweight to Underweight, and downgrading Turkey from Neutral to Underweight.

Why did they downgrade Indonesia and Brazil? JPMorgan didn’t elaborate in the note, only saying:

Post the US elections 10-year bond yields moved from 1.85% to 2.15%. Bond markets are starting to price in faster growth and higher deficit. This spike in volatility increases EM risk premiums (i.e. Brazil, Indonesia CDS) and potentially stops/reverses flows into EM fixed income.

It is tactical in that both economies are improving supporting EPS growth, and lower policy rates support valuations for full-year 2017. We think you will get a better buying opportunity. US and EM fixed income stability is a key condition to add back to these market.

(Disclaimer: The comments below are all Barron’s view. While JP Morgan has moved Indonesia to a technical Underweight, the bank has a structurally positive view on Indonesia.)

Take a look at Indonesia’s 5-year Credit Default Swaps (CDS) (see chart). Emerging markets are fairly calm this year and Indonesia’s perceived credit risk, which CDS’s measure, is well below the level seen a year ago. But now that Trump is President-elect, things could look ugly.


Indonesia’s 5-year CDS saw a spike in the last week but still well below one year ago. Reuters

Concerns about Indonesia have been compounded by rising social tensions in Jakarta, the nation’s political and commercial capital. Indonesia, the world’s largest Muslim country and one of the largest democracies was rocked earlier this month when hard-line Muslims staged a massive protest against Jakarta’s christian Governor Basuki Tjahaja Purnama. They accused the ethnic Chinese politician of committing blasphemy against Islam. Purnama said in a public gathering that Islamic groups were using a passage of the Koran, interpreted by some as prohibiting Muslims from living under the leadership of a non-Muslim, to urge people not to vote for him. Purnama has apologized for that remark.

In addition, foreign investors net bought $2.4 billion of Indonesian stocks this year. As U.S. bond yields rise, these foreigners will want to pull out.

This morning, the Jakarta Index tumbled another 2.8%, while the rupiah fell 0.4%. On Friday, the iShares MSCI Indonesia ETF (EIDO) tumbled 4.5%.


http://www.wsj.com/articles/indonesia-cuts-ties-with-j-p-morgan-over-downgrade-1483434650
Indonesia Cuts Ties With J.P. Morgan Over Downgrade
By Ben Otto and I Made Sentana
Updated Jan. 3, 2017 8:20 a.m. ET

Equities downgrade could destabilize country’s financial system, Indonesia officials say


J.P. Morgan was one of several banks appointed to receive repatriated funds from Indonesians in a tax-amnesty program aimed at boosting funding for President Joko Widodo’s infrastructure projects. Photo: money sharma/Agence France-Presse/Getty Images

JAKARTA-Indonesia’s government has cut its business partnerships with J.P. Morgan Chase & Co., saying the bank’s recent rating downgrade of the nation’s stocks, based in part on Donald Trump’s U.S. election win, could destabilize Indonesia’s financial system.

J.P. Morgan had multiple business partnerships with the government of Southeast Asia’s largest economy, including acting as one of several banks appointed to receive penalty payments from Indonesians in a tax-amnesty program aimed at boosting funding for President Joko Widodo’s ambitious infrastructure projects. J.P. Morgan is one of the largest foreign banks operating in Indonesia.

In a letter announcing the decision, the Finance Ministry’s treasury directorate general said that, effective Jan. 1, it was ending all partnerships with J.P. Morgan because of the bank’s research that the government said could disturb the stability of the country’s financial system.

In a Nov. 13 report about the global repercussions of Mr. Trump’s victory, J.P. Morgan downgraded its rating on Indonesian equities to underweight from overweight, noting that a rise in bond-market volatility “increases emerging-market risk premiums” and “potentially stops/reverses flows into emerging-market fixed income.”

“There are losers from Trumponomics,” the report said. An underweight rating means the bank expects an investment to underperform others over the next six to 12 months. The bank also downgraded Turkish equities to underweight and Brazil to neutral.

J.P. Morgan will also no longer act as a government-appointed primary dealer in government domestic bond auctions, nor as a panelist for Indonesia’s global dollar-bond offerings, Robert Pakpahan, Indonesia’s director general of budget financing and risk management, said Tuesday. The bank’s research wasn’t credible and accurate, he said.

“We don’t close ourselves to assessment because it’s important for us to improve ourselves,” Finance Minister Sri Mulyani said. “But the institutions with big names have very high responsibility in creating positive psychology instead of doing [something] misleading.”

J.P. Morgan declined to comment on Indonesia’s views.

The bank said its business in Indonesia continues to operate as usual and that the effect on clients is minimal. It said it is working with the Finance Ministry to resolve the issue.

J.P. Morgan has worked on six debt-capital-markets deals for the Indonesian government since 2012 worth $13.7 billion, including a $3.4 billion deal it worked on with other banks in June last year, according to Dealogic.

On Nov. 14, the day after J.P. Morgan’s report was issued, the yield on Indonesia’s 10-year government bond shot up 0.466 percentage point, its biggest intraday jump since January 2011, to 7.895%. Yields rise as prices fall.

The moves came amid a sharp selloff in government bonds around the globe after Mr. Trump’s Nov. 8 victory, which bruised emerging markets. Foreign investors sold $1 billion worth of Indonesian debt in just one week after the election, about 13% of net inflows for the entire year at that point.

Mr. Trump’s victory triggered a selloff especially in emerging-market stocks and bonds, with investors pushing up U.S. stocks and Treasury yields on the president-elect’s plans for tax cuts and higher infrastructure spending. In Indonesia, the local stock market has lost almost 4% of its value since the election, while the rupiah has slid 3% against the U.S. dollar. In the fourth quarter last year, foreigners sold a net $2.8 billion in stocks and bonds.

Harry Su, an analyst with Bahana Securities in Jakarta, said he has mixed feelings about the report and the government’s decision. “I think the government expects greater support and a more balanced report from its partners,” he said. But he added, “Negative feedback also provides a positive warning system for the government.”

Indonesia is a $900 billion economy that has been growing at 5% or better in recent years. Ms. Mulyani, a former managing director for the World Bank, took over the Finance Ministry last year amid efforts by President Widodo to inject changes and fresh credibility into an economy that he says could be growing 7% a year by 2019.?

Ms. Mulyani has been attempting to bring more credibility to the Finance Ministry, including by cutting spending and implementing reforms to increase tax collection.

Write to Ben Otto at ben.otto@wsj.com and I Made Sentana at i-made.sentana@wsj.com

Related Coverage
Indonesia President Pledges to Follow Tax Amnesty With Reforms (Oct. 20)
Reformer Finance Minister Sri Mulyani Confronts a New Indonesia (July 29)

holt jurie, 8 days ago
now that’s how to get finances in order; “give us the “correct” rating or git on down the road.”
nice.

Gary Parsons, 8 days ago
Question is, how many times in the past has the threat of dropping ties led to an improved rating by the financial institution?

Fred Fraenkel, 8 days ago
Time will pass before the analysts judgement is either proved to be correct or incorrect. However, the notion that censure best deals with criticism was, is and will be incorrect. Indonesia’s actions increase the odds that the JPM analysts are right.

al pittman, 8 days ago
This will probably work out to be the best option for u.s. money interest. Letting the Asian money market cover their “plans” lowers our risk as Obama Asian policy continues to imploy in that region.

Mike Donovan, 8 days ago
“The bank’s research wasn’t credible and accurate, Here said.”
But of course, they just made it up, they were bored and had nothing better to do.

phil sanders, 8 days ago
This type of childishness at the top levels of govt. is exactly why many countries will remain poor. Instead of really considering what they said, they ban them.


https://www.bloomberg.com/news/articles/2017-01-03/indonesia-ends-jpmorgan-partnerships-on-downgrade-okezone-says
Indonesia Cuts JPMorgan Ties After Bank Downgrades Equities
by Rieka Rahadiana, Chanyaporn Chanjaroen, and Herdaru Purnomo
January 3, 2017, 12:10 PM GMT+7
updated on January 3, 2017, 8:02 PM GMT+7

JPMorgan downgraded equities to underweight after Trump win
Bank says it’s trying to resolve matter with finance ministry

https://www.bloomberg.com/api/embed/iframe?id=5f7728fb-7beb-4db4-b161-f34d7710d2d8

http://bloom.bg/2j29Wa7
Why Indonesia Is Cutting Ties With JPMorgan

Indonesia’s government said it terminated all business partnerships with JPMorgan Chase & Co. after the U.S. bank downgraded its assessment of equities in 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’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.

JPMorgan’s business in Indonesia continues to operate as normal, the bank said in an e-mailed 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.

The biggest U.S. bank was part of a 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 U.S. dollars, according to data compiled by Bloomberg.

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.


http://www.reuters.com/article/us-indonesia-bonds-jpmorgan-idUSKBN14N0BS
Indonesia penalizes JPMorgan for negative report in latest emerging markets skirmish
By Nilufar Rizki, Eveline Danubrata and David Henry | JAKARTA/NEW YORK
Tue Jan 3, 2017 | 2:19pm EST

http://s4.reutersmedia.net/resources/r/?m=02&d=20170103&t=2&i=1167401285&w=780&fh=&fw=&ll=&pl=&sq=&r=LYNXMPED02079
A view of the exterior of the JP Morgan Chase & Co. corporate headquarters in New York City May 20, 2015. REUTERS/Mike Segar/Files

Indonesia has cut some ties with JPMorgan Chase & Co (JPM.N) after the bank’s research analysts issued a negative report on the country, the latest in a series of skirmishes between Wall Street banks and governments in emerging markets.

Indonesia will no longer use JPMorgan as a primary bond dealer and has also revoked a special designation that allows it to perform certain banking services, Suahasil Nazara, head of the Ministry of Finance’s fiscal policy office, told Reuters on Tuesday.

It is the second time recently that JPMorgan’s research arm has drawn ire from the Indonesian government, and highlights the inevitable conflicts banks face when their analysts express a negative view on a country or company that their investment bankers are trying to court.

In other cases, banks have altered research reports, lost lucrative contracts or parted ways with analysts following controversies about their negative opinions.

JPMorgan did the right thing by not backing down from its report, said Roy C. Smith, a finance and management professor at New York University’s business school. The bank stands to lose relatively little in Indonesia, where it does not have much financial exposure.

“(It’s) a mistake by Indonesia, which needs JPMorgan’s support and advice more than the bank needs Indonesia,” Smith said. “No effort by governments unhappy with research calls to ‘discipline’ the banks have been successful, though efforts are made from time to time to satisfy local political expectations.”

Global banks made changes to how they perform research in 2003, after a sweeping settlement with then-New York Attorney General Eliot Spitzer and U.S. regulators. They erected hard barriers between analysts and bankers and altered compensation structures to prevent conflicts of interest from affecting research.

But the conflicts persist. Although pressure is usually less explicit than what JPMorgan faces in Indonesia, banks ranging from Morgan Stanley (MS.N) in China to Banco Santander (SAN.MC) in Brazil have faced similar rows with governments in emerging markets.

In JPMorgan’s case, analysts led by Adrian Mowat downgraded their investment recommendation on Indonesia stocks to “underweight” from “overweight” in a Nov. 13 note, and also downgraded Brazil equities to “neutral.”

They cited higher risk premiums for emerging markets after Donald Trump won the U.S. presidential election, predicting that higher volatility might stop or reverse flows into fixed-income assets.

The analysts characterized the recommendation as merely a “tactical” response to Trump’s victory. They noted that economies in both Indonesia and Brazil are improving, with lower policy rates likely to support valuations for 2017.

Nazara, of Indonesia’s finance ministry, said JPMorgan’s analysis “did not make sense” because it gave Brazil a better rating than Indonesia, despite what he said was a more stable political situation in the Southeast Asian nation.

“We have asked them to clarify their assessment,” Nazara said. “They’ve explained to us, but we found their argument not credible. It’s not that we think we’re so great, but we look at ourselves and we look at other countries’ economies.”

“Our mindset is, if you’re doing business here in Indonesia, the spirit is to maintain stability. Don’t create unnecessary volatility to create business,” he added.

After performing what Nazara described as a “comprehensive review,” Indonesia decided to drop JPMorgan as a primary dealer and a so-called perception bank. A 2006 government decree says perception banks are appointed by the finance minister to receive transfers of state revenue not related to imports, including tax, onshore excise and non-tax revenue.

A JPMorgan spokeswoman said on Tuesday that it continued to operate its business in Indonesia as usual.

“The impact on our clients is minimal, and we continue to work with the Ministry of Finance to resolve the matter,” she said by email.

JPMorgan strategists have had a “neutral” recommendation on emerging market government bonds, including those of Indonesia, since before the election, a JPMorgan spokesman said.

Robert Pakpahan, Indonesia’s director general for budget financing and risk management, told reporters on Tuesday that JPMorgan’s research should not have a major impact on Indonesia’s future bond issuance, but the sanction on JPMorgan would remain in place “until we say otherwise.”

In 2015, Indonesia’s then-finance minister said that JPMorgan had been “sanctioned” for a negative report recommending less exposure to government bonds, but did not explain what the sanctions involved. [reut.rs/2iF58uK]

Banks have encountered a variety of problems managing conflicts in emerging markets.

In another high-profile skirmish in 2006, Morgan Stanley’s head economist in Asia, Andy Xie, left the bank after a critical email he sent about Singapore was leaked. In 2014, Banco Santander publicly fired an analyst who had published a critical note about Brazil’s economic policies.

Goldman Sachs Group Inc (GS.N) lost a lucrative underwriting mandate for South Korea’s Kookmin Bank [KOOKM.UL] in 2008 after one of its analysts issued a sell recommendation on the shares. More recently, Goldman has been embroiled in a scandal regarding the way it courted Malaysia’s sovereign wealth fund, while JPMorgan has faced probes into its hiring children of Chinese officials to gain an edge in the country.

(Reporting by Nilufar Rizki and Eveline Danubrata in Jakarta and David Henry in New York; Additional reporting by Gayatri Suroyo, Hidayat Setiaji and Fransiska Nangoy in Jakarta and Michael Flaherty and Anna Irrera in New York; Writing by Lauren Tara LaCapra; Editing by Will Waterman and Nick Zieminski)

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http://www.zerohedge.com/news/2017-01-03/indonesia-terminates-all-business-relationships-jpmorgan-after-downgrade
Indonesia Terminates All Business Relationships With JPMorgan After Downgrade
by Tyler Durden, Jan 3, 2017 8:46 AM

We officially have a new definition ot “thin-skinned”.

In what may be one of the most dramatic retaliations to a downgrade report, Indonesia’s government said it has terminated all business partnerships with JPMorgan Chase after the U.S. bank downgraded its outlook on stocks in Southeast Asia’s largest economy. The finance ministry announced it would 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. The reason: Pakpahan said a November research report issued by the bank was not “accurate or credible.”

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, Bloomberg reported.

Perhaps Indonesia’s anger will promptly blow off once the warning shot has been fired: at least as of this morning, JPMorgan’s business in Indonesia continues to operate as normal, the bank said in an e-mailed 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.

The government doesn’t see it quite as innocently, however: 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 biggest U.S. bank was part of a underwriting syndicate when Indonesia sold 3 billion euros ($3.1 billion) of bonds in June. Hwoever, the lender wasn’t listed as a member of syndicates for two more recent offerings denominated in yen and U.S. dollars, according to Bloomberg data.

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.

Meanwhile, JPM’s assessment appears to have been right: 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 local markets and the rupiah lower, forcing policy makers to intervene to stabilize the currency.

For now Indonesia remains furious, and blames JPM for the recent market volatility: 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.

Curiously, in the aftermath of the last financial crisis, it was the rating agencies who got the bulk of the blame; that sellside equity research is now facing the proverbial “firing squad” when issuing negative research is rather troubling – this phenomenon is certainly not confined to the sovereign level – and indicates how banks, once caught with a Buy or Neutral rating on any given name, are loath to cut or downgrade, aware of the potential foregone future revenue opportunities as a result of telling the truth.

https://www.bloomberg.com/news/articles/2017-01-03/indonesia-ends-jpmorgan-partnerships-on-downgrade-okezone-says


http://www.nasdaq.com/article/indonesia-punishes-jp-morgan-for-bad-rating-20170103-00584
Indonesia Punishes JP Morgan For Bad Rating
January 03, 2017, 10:04:00 AM EDT By RTT News

(RTTNews.com) – Indonesia’s government has terminated its business ties with JPMorgan Chase & Co. ( JPM ), citing the U.S. lender’s recent downgrade of equities in Southeast Asia’s largest economy. The government said that the downgrade has the potential to disrupt the stability of the national financial system.

The Indonesian government’s finance ministry said it will stop using JP Morgan as a primary bond dealer and has also revoked its status as a “perception bank.” A perception bank is a bank that is appointed by the Indonesian government to receive payments of taxes and other sources of income on behalf of the government.

Indonesia’s Finance Minister Sri Mulyani Indrawati called the report by JP Morgan as “misleading.”

JP Morgan has multiple business partnerships with the government of Indonesia. The lender was a traditional underwriter for Indonesian government’s bonds.

Bank Indonesia Governor Agus Martowardojo reportedly said that tax payments by Indonesian companies that were earlier routed through JP Morgan will now be passed to the government through other banks.

In a report dated November 13, JP Morgan’s emerging markets equity strategists downgraded Indonesia’s equity market by two notches to “underweight” from “overweight.” The bank had also downgraded Brazil to “neutral” from “overweight.”

While JP Morgan did not elaborate its reasons for the downgrade, it said the move was a “tactical response” to Donald Trump’s election win in the U.S. The company cited the spike in volatility of the bond market following Trump’s win.

“Post the U.S. elections 10-year bond yields moved from 1.85% to 2.15%. Bond markets are starting to price in faster growth and higher deficit. This spike in volatility increases EM risk premiums (i.e. Brazil, Indonesia CDS) and potentially stops/reverses flows into EM fixed income,” JP Morgan said in the note.

In contrast, Fitch Ratings said on December 21 that it has upgraded Indonesia’s rating outook from “stable” to “positive,” and affirmed its rating at BBB-.

For comments and feedback: contact editorial@rttnews.com


https://www.ft.com/content/0d7b302c-d1a2-11e6-b06b-680c49b4b4c0
JPMorgan in row with Indonesia over equities rating
by: Don Weinland in Hong Kong, January 5, 2017

https://www.ft.com/__origami/service/image/v2/images/raw/http%3A%2F%2Fcom.ft.imagepublish.prod-us.s3.amazonaws.com%2F9ecea360-c086-11e6-81c2-f57d90f6741a?source=next&fit=scale-down&width=700
AP

Bank has angered government after it downgraded country’s equities to ‘underweight’

The Indonesian government lashed out at JPMorgan Chase on Tuesday, saying it had severed all ties between the country’s finance ministry and the US bank over a downgrade to its equity rating.

Ministry of Finance officials told reporters in Jakarta that it had already stopped using JPMorgan as a primary dealer and underwriter for sovereign bonds, following a mid-November report from the bank that downgraded the country’s equity rating by two categories to “underweight”.

The report, which also lowered Brazil’s rating to “neutral”, said the downgrade was a response to Donald Trump’s election win in the US.

Suahasil Nazara, head of the ministry’s fiscal policy office, told Reuters: “Our mindset is if you’re doing business here in Indonesia the spirit is to maintain stability. Don’t create unnecessary volatility to create business”.

Local newspapers first reported the statement. The ministry declined to comment further.

JPMorgan has shrugged off the announcement, stating: “The impact on our clients is minimal and we continue to work with the Ministry of Finance to resolve the matter.”

But the row highlights how ratings and economic outlooks have become a tricky issue for governments, banks and rating agencies around the world in recent years

In 2013, Standard & Poor’s accused the US Justice Department of retaliating against a downgrade to its AAA credit rating in August 2011. S&P claimed the Justice Department’s $5bn lawsuit concerning the rating of bonds backed by subprime mortgages was actually reprisal for the landmark downgrade, the first of its kind.

In 2014, HSBC came under fire for adjusting the reasoning in a report that downgraded Hong Kong’s outlook to “underweight”.

Our mindset is if you’re doing business here in Indonesia the spirit is to maintain stability. Don’t create unnecessary volatility to create business
Suahasil Nazara, head of finance ministry’s fiscal policy office

The HSBC report originally cited the wave of political protests by Occupy Central as the main reason for the downgrade. Hours later, after receiving criticism on Twitter and other social media, the bank bumped Occupy Central to the bottom of a list of reasons for the downgrade.

“The current environment is much worse,” said Andy Xie, an independent economist, comparing the present to 2006, when he led Morgan Stanley’s economic research for Asia in Singapore. “So much overcapacity in the industry. Banks have no incentive to reward independent research.”

Mr Xie left his position at the US bank after an internal memo was leaked containing disparaging comments about Singapore.

The penalty for JPMorgan marks the second time Indonesia’s Ministry of Finance has rebuked the bank over its research.

In August 2015, the bank drew the ire of the then-finance minister Bambang Brodjonegoro and central bank governor Agus Martowardojo for a similar downgrade. Mr Martowardojo said that JPMorgan was “spreading panic” in the country, and Mr Brodjonegoro said the bank would be “sanctioned” but declined to elaborate.

The Indonesian government has been sensitive to ratings from global banks since the US Federal Reserve signalled it would start raising interest rates in 2013.

Indonesia’s current account deficit has fallen since the Fed’s “taper tantrum” but, with foreign currency denominated debt running at about 30 per cent of gross domestic product as of mid-December, Indonesia still faces the risk of a sell-off of the rupiah, according to Capital Economics.

Additional reporting by Ben Bland

This story has been amended since publication to reflect that the downgrade was to Indonesian equities, not bonds

The Scrutineer, 7 days ago
Therein lies the rub, all this talk about regulating our way to in independent bank research is nonsense. It’s the exact same with corporate research, caveat emptor and move on.

The Sinner, 8 days ago
JPM’s argument that Trump won is a bit shallow here. It has zero bearing right now.
Remember banks need publicity and profits. Governments need good news and jobs.

KSA, 8 days ago
Oh dear! JPM will lose the privilege of underwriting Indonesia’s sovereign bonds for 3 basis points in fees!

Saughton, 7 days ago
@KSA If that…


http://www.bbc.com/news/business-38514900
Indonesia up in arms over being downgraded by JP Morgan
Karishma Vaswani Asia business correspondent, 5 January 2017


Image copyright AFP

“We are not shutting ourselves off to external assessment – we need it to improve ourselves,” said Sri Mulyani Indrawati, Indonesia’s Finance Minister during a recent press conference in Jakarta. “But institutions with big names have big responsibilities – they need to create a positive psychology.”

It is surprising, to say the least, to hear these sorts of comments from Ms Indrawati. She is no debutante on the international financial stage; she’s a former managing director of the World Bank, and widely respected in the international business community.

Surely, I thought, she knows how this works.

Investment banks regularly make calls or recommendations on equities or stocks. In this particular case, towards the end of last year JPMorgan Chase released a report about the global implications of Donald Trump’s victory – and downgraded its rating on Indonesian equities from overweight to underweight – which effectively is a recommendation to sell Indonesian shares.

But Indonesia wasn’t alone in getting the downgrade – Turkish equities saw their rating shift to underweight and Brazil’s to neutral.

The fact that Brazil was given a better weighting than Indonesia has got finance ministry officials in Jakarta up in arms.

Some have said JPMorgan’s analysis of the equity market “does not make sense” and that the bank’s assessment of Indonesia’s economic fundamentals isn’t “credible” – reasons, presumably, that have been behind Indonesia’s decision to cut some business ties with JPMorgan.

Ms Indrawati has spoke of the “special privileges” that JPMorgan has had in Indonesia – and suggested that as partners, those privileges come with accountability.


AFP, Indonesian Finance Minister Sri Mulyani Indrawati says JPMorgan’s privileges come with responsibilities

Meanwhile, JPMorgan has said in an emailed statement to the BBC that its business in Indonesia continues to operate as usual, and that the impact on clients is minimal. The bank has also said it is working with the Ministry of Finance to resolve the matter.

It is true that JPMorgan has a plum spot in Indonesia – it is one of the largest foreign banks operating in the country, and has been responsible for collecting penalty payments for the tax amnesty programme the government has launched.

It is also one of the biggest distributors of Indonesian government bonds overseas – and this may be one of the biggest reasons why the government was so irate.

“On one hand JP Morgan makes commissions selling Indonesian government bonds,” said Eric Sugandi, chief economist at SKHA Institute for Global Competitiveness in Jakarta, “but at the same time it writes a report basically advising to sell Indonesian equities.”

“From an investment bank’s perspective, maybe it seems like Indonesia is treating JP Morgan badly. But from Indonesia’s perspective, it feels like a betrayal.”

Still, Indonesia’s reaction does seem harsh. JPMorgan is completely within its remit to provide independent research reports to clients about a country that it is also advising. Research and investment arms of banks are supposed to be separate and operate independently.

But part of the problem, as independent analyst Andy Xie told me, is that the balance of power between emerging markets governments and Western financial institutions has shifted over the last decade.

“Western banks aren’t respected any more in emerging Asia, not like they were ten years ago,” says Mr Xie.

Independent research?

Mr Xie knows first hand what it’s like to get punished by a government for his views. He left his job at Morgan Stanley in Singapore after a disparaging internal memo he wrote about the country was leaked.

“Western banks have lost credibility since the 2008/2009 financial crisis,” he told me.

“Many people don’t believe what the reports say, or whether they are independent. This didn’t happen with JPMorgan and Indonesia – but the unfortunate thing is that sometimes there are banks who will make a call on a stock or a country only to reverse that in a few days time – and you just have to see who has made the most money on that trade and connect the dots – often it’s a client of the same institution.”


Image copyright Getty Images

Privately, many in the industry concurred with Mr Xie’s assessment. As one banker said to me “it’s wrong, but it happens.” Business is so bad these days, some former bankers have said to me, that often the research units of investment banks are badly financed and need to find a way to justify their existence.

While these sorts of suspicions about the wider banking industry may help to explain Indonesia’s reaction, the truth is most market analysts are in broad agreement that the country is likely to be hit by an outflow of foreign cash under a Trump presidency.

The economics are simple – rising interest rates in the US will see a flow of funds from emerging markets like Indonesia to American assets, searching for higher returns.

But that logic may not be enough to persuade Indonesia’s finance ministry.

“We know we aren’t perfect,” Ms Indrawati concludes in her remarks to the local press in Jakarta. “But we will improve in an accountable and open manner. And we want our partners to be like us – responsible, and accountable.”


http://www.thejakartapost.com/news/2017/01/05/jpmorgan-lashing-by-indonesia-signals-global-threat-to-analysts.html
JPMorgan lashing by Indonesia signals global threat to analysts
Bloomberg, New York | Thu, January 5, 2017 | 04:43 pm


Indonesia recently terminated all of its deals with the JPMorgan Chase Bank, NA, a subsidiary of New York-based JPMorgan Chase, after it published a research note that downgraded the country two notches from the “overweight” to “underweight” position. — Bloomberg (Bloomberg/Bloomberg)

The world is getting more hazardous for skeptical analysts, the banks that employ them and investors who rely on their published research.

Even by the rough-and-tumble standards of emerging markets, Indonesia’s punishment of JPMorgan Chase & Co. this week for a bearish analysis of the nation’s stock market stands out. The country’s finance ministry cut business ties with America’s biggest bank, telling reporters Tuesday that the firm’s November research note wasn’t “accurate or credible.”

Official attempts to deter such research are nothing new in developing economies, but rarely do governments retaliate against a Wall Street powerhouse for publishing opinions that contradict official views. The move builds on a trend: In July, Turkey’s banking regulator issued an industry-wide warning to avoid negative reports. In 2014, Brazil President Dilma Rousseff chastised an analyst for suggesting her election would hurt the economy.

“It’s definitely been getting more aggressive recently,” said Paul McNamara, a London-based emerging markets fund manager at GAM Ltd., which oversees client assets of about $65 billion.

As money managers around the world pull capital from developing economies on concerns over rising U.S. interest rates and a stronger dollar, policy makers are becoming especially sensitive to critical analyst opinions, according to Medley Global Advisors. The risk for Indonesian authorities is that their actions backfire by undermining investor confidence in the country’s market research.

“Published research is already a diluted view, but these kinds of actions will make it even more bland,” McNamara said. “Retail investors will have no idea what analysts are really thinking because the written reports won’t say anything real.”

JPMorgan downgraded Indonesia’s equity market by two notches to underweight from overweight in a Nov. 13 report, calling it a “tactical response” to Donald Trump’s election win. The bank also cut its rating on Brazil, while noting that both countries may provide a “better buying opportunity” later.

Indonesia’s finance ministry said Tuesday it will stop using JPMorgan as a primary dealer and as an underwriter of its sovereign bonds. While Finance Minister Sri Mulyani Indrawati said the government is open to improvement and respects the assessments of research providers, she said banks should take responsibility for economic reports that “could influence fundamentals and psychology.”

“The finance ministry and the government are very open to criticism, but JPMorgan’s research result was pretty weird and unfair,” Sofjan Wanandi, head of the experts team at the vice president’s office, said in an interview on Wednesday.

JPMorgan’s business in Indonesia continues to operate as normal, the bank said in an e-mailed statement Tuesday. “The impact on our clients is minimal and we continue to work with the Ministry of Finance to resolve the matter,” the bank said. On Wednesday, the finance ministry clarified that it won’t stop JPMorgan from conducting private-sector business in the country.

Government retaliation for negative research can have a chilling effect on market analysis.
Some investment banks in Turkey scaled back commentary on sensitive political subjects after the banking regulator warned brokerages last July against publishing “reports that would turn expectations and the atmosphere negative.”

That same month, the head of research at one of Turkey’s largest brokerages was stripped of his professional license and charged criminally over a report analyzing the impact of a failed July 15 coup targeting President Recep Tayyip Erdogan. The criminal charge was later dropped, but an investigation started by the capital markets regulator is still ongoing. An official for the Ankara-based market regulator SPK, who asked not to be named citing the institution’s policy, declined to comment on the investigation.

In 2014, Rousseff publicly shamed an analyst at Banco Santander Brasil SA for forecasting a deterioration in the country’s currency and stock markets if she were re-elected. The firm later said it fired the analyst, disowning the remarks as that person’s opinion, not necessarily reflecting the company’s view. The episode spooked other analysts, according to Klaus Spielkamp, head of fixed-income sales at Bulltick LLC.

“If anybody had anything bad to say about Brazil at the time, they wouldn’t say it,” he said. “Everybody was afraid.”

Rousseff’s campaign press office declined to comment at the time, as did the nation’s banking association, Febraban. Rousseff was replaced as president last year after being impeached for breaking budget laws.
Other governments’ moves also have stoked concerns among research analysts.

China’s crackdown on hedge funds and broker-dealers for alleged trading abuses during its 2015 stock market rout was seen by some as targeting negative financial views. And in Italy prosecutors accused Fitch in 2012 of mismanaging its analysis of the euro-zone debt crisis. The firm disputed the claim, and the case against it was later dismissed.

While governments usually go after negative research during political or economic turbulence at home, the biggest concern for emerging markets today is capital outflows tied to the prospect of faster interest rate increases under a Trump presidency. International investors pulled $23 billion from developing-nation funds from the start of October through mid-December, according to the Institute of International Finance.

“Governments are sensitive to criticism, especially in countries where there are large capital inflows that can quickly turn into outflows and prompt a currency sell-off,” said Nigel Rendell, London-based senior analyst at Medley Global Advisors.

Yet even the most developed market isn’t immune to concerns that free speech is being stifled. S&P Global Ratings initially claimed that the U.S. government’s 2013 lawsuit against the firm for allegedly inflating ratings on subprime-mortgage bonds was in retaliation for S&P’s downgrade of America’s sovereign credit rating.

The firm dropped that accusation when settling the government’s case in 2015, acknowledging in a statement of facts that it hadn’t found evidence to support the claim. The company didn’t admit wrongdoing in agreeing to pay $1.375 billion to federal and state authorities.

For Andre Spicer, a professor at the Cass Business School at City University in London, the increased willingness of governments to challenge big banks like JPMorgan reflects the industry’s diminished reputation in the wake of the global financial crisis.

“In the past, large investment banks were masters of the universe,” Spicer said. “Now, nation-states are flexing their muscles.”

Still, Indonesia relies on international securities firms to market its sovereign bonds to overseas investors, who accounted for about 40 percent of local government debt holdings as of September, according to the Asian Development Bank. If policy makers were to alienate more banks with similar spats, they might undermine the government’s ability to finance its spending plans.

“JPMorgan has been in the country for a very long time,” said Christopher Wheeler, an analyst at Atlantic Equities in London. “It will blow over them, but probably do more harm to Indonesia.”


http://www.thejakartapost.com/news/2017/01/08/indonesia-considers-curbs-on-negative-research-by-banks-.html
Indonesia considers curbs on negative research by banks
Hendaru Purnomo, Rieka Rahadiana and Yudith Ho
Bloomberg, Jakarta | Sun, January 8, 2017 | 10:52 am

Indonesia considers curbs on negative research by banks General image of Indonesia economy ahead of central bank rate decision (Bloomberg/File)

Indonesia’s government is considering curbs on negative research reports by foreign banks, building on its decision to punish JPMorgan Chase & Co. for issuing a bearish call on the country’s equity market.

The finance ministry may ask top management at global banks which hold primary dealerships in Indonesian sovereign bonds to sign pledges to refrain from issuing research that could destabilize local financial markets, according to Loto Srinaita Ginting, the ministry’s director of government securities.

The proposal was discussed with some primary bond dealers at a meeting in mid-December, according to a person familiar with the matter. It would require approval by Finance Minister Sri Mulyani Indrawati, another person said.

Indonesia this week said it stopped using JPMorgan as a primary dealer and underwriter of sovereign bonds, a retaliation for a November report downgrading the country’s equities to “underweight” from “overweight” following Donald Trump’s U.S. election victory. Commenting on the decision to cut government ties with JPMorgan, Mulyani said Tuesday that banks should take responsibility for economic reports that “could influence fundamentals and psychology.”

Global banks which hold primary dealerships in Indonesian government bonds include Standard Chartered Plc, HSBC Holdings Plc, Deutsche Bank AG and Citigroup Inc. HSBC Indonesia’s head of communications, Daisy Primayanti, declined to comment on the proposed curbs, as did representatives of the other three banks.

Other Warnings

Official attempts to deter critical research are nothing new in developing economies. In July, Turkey’s banking regulator issued an industry-wide warning to avoid negative reports. In 2014, then Brazil President Dilma Rousseff chastised an analyst for suggesting her election would hurt the economy.

As money managers around the world pull capital from developing economies on concerns over rising U.S. interest rates and a stronger dollar, policy makers are becoming especially sensitive to critical analyst opinions, according to Medley Global Advisors.

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.

JPMorgan’s business in Indonesia continues to operate as normal and the bank is working with the finance ministry to resolve the matter, it said in e-mailed statement Tuesday.

The November research report issued by the bank was not “accurate or credible,” Robert Pakpahan, the Indonesian finance ministry’s director-general for budget financing and risk management, told reporters in Jakarta.

(Read also: Investment not affected by JPMorgan issue: Top official) http://www.thejakartapost.com/news/2017/01/05/investment-not-affected-by-jpmorgan-issue-top-official.html

Bond Offerings

The biggest U.S. bank was part of a 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 U.S. dollars, according to data compiled by Bloomberg.

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.


http://www.dailymail.co.uk/wires/reuters/article-4101378/Indonesia-bars-JPMorgan-dollar-sukuk-issuance–official.html
Indonesia bars JPMorgan from next dollar sukuk issuance – official
By Hidayat Setiaji and Gayatri Suroyo, Reuters
Published: 09:57 GMT, 9 January 2017 | Updated: 09:57 GMT, 9 January 2017

JAKARTA, Jan 9 (Reuters) – Indonesia has barred U.S. bank JPMorgan Chase & Co from submitting an underwriting proposal for its next issuance of dollar-denominated Islamic bonds, a finance ministry official said on Monday.

The government has asked other banks to submit proposals by Thursday for a planned dollar sukuk offering, IFR, a Thomson Reuters publication, reported on Monday.

The government’s exclusion of JPMorgan comes shortly after the Finance Ministry said it was penalising the U.S. bank following its issuance of a negative report on Indonesia in November.

“The point is (JPMorgan) will no longer do business with the government,” said Suahasil Nazara, head of the Finance Ministry’s fiscal policy office, when asked if JPMorgan could make a proposal for the U.S. dollar sukuk offering.

A JPMorgan spokeswoman declined to comment.

In the report issued after Donald Trump’s election as U.S. president, JPMorgan downgraded its Indonesian stocks recommendation to “underweight” from “overweight”.

On Jan. 4, Nazara defended the penalising of JPMorgan, saying its research was “not credible and not objective”.

RESEARCH RULE COMING

Indonesia is planning to issue a rule to ensure primary bond dealers produce only “factual” research, senior government officials said last week.

A primary bond dealer is a bank or a securities firm appointed by the finance minister that can buy government bonds in auctions and resell them in the secondary market. Indonesia had 19 such dealers as of Nov. 25.

Officials have met with primary dealers to convey the message that they should “help the government to maintain stability,” Nazara said on Monday.

In the JPMorgan case, the Finance Ministry dropped the U.S. bank’s services as a primary dealer for domestic sovereign bonds and as an underwriter for bonds sold to the global market. The bank also no longer receives certain transfers of state revenue.

Before the punishment, JPMorgan helped Indonesia to raise at least $11 billion by selling global bonds between 2012 and 2016, according to data from the Finance Ministry and the central bank.

JPMorgan was part of a syndicate of banks working on Indonesia’s sale of 3 billion euros ($3.16 billion) worth of bonds last June, but it was not listed for two more offerings in U.S. dollar and yen since then.

In 2015, JPMorgan was one of the lead managers for a dollar sukuk offering for Indonesia that raised $2 billion.

Foreigners hold more than 37 percent of Indonesia’s sovereign bonds, while the local capital market lacks depth and liquidity, making the perception of foreign investors particularly important for Southeast Asia’s biggest economy.

($1 = 0.9493 euros) (Reporting by Hidayat Setiaji and Gayatri Suroyo; Writing by Eveline Danubrata; Editing by Richard Borsuk)


http://www.reuters.com/article/indonesia-bonds-idUSJ9N1CH01M?feedType=RSS&feedName=bondsNews
Indonesia finance ministry issues new rules for bond dealers
Tue Jan 10, 2017 | 10:56pm EST

Jan 11 Indonesia’s finance ministry announced new rules that require primary bond dealers to “safeguard” their partnership with the government and avoid conflicts of interest.

Primary dealers “have the duty to safeguard the partnership with the Indonesian government based on professionalism, integrity, the avoidance of conflict of interest, and looking at the interests of the Republic of Indonesia,” according to documents uploaded to the ministry’s website on Wednesday.

The documents, dated Dec. 30, said the finance minister can revoke the license of a primary dealer if it does not fulfill the stated conditions.

The finance minister also has the authority to accept or reject an application to be a primary dealer by taking into consideration the track record of the bank or securities firm, including its working experience with the ministry.

The Indonesian government cut its business ties with JPMorgan Chase & Co following a November downgrade by the U.S. bank in its Indonesian stocks recommendation to “underweight” from “overweight”. (Reporting by Eveline Danubrata and Gayatri Suroyo; Additional reporting by Fransiska Nangoy; Editing by Richard Borsuk)


http://www.cnbc.com/2017/01/10/reuters-america-indonesia-finance-ministry-issues-new-rules-for-bond-dealers.html
Indonesia finance ministry issues new rules for bond dealers
Reuters, 5 Hours Ago

JAKARTA, Jan 11 (Reuters) – Indonesia’s finance ministry announced new rules that require primary bond dealers to “safeguard” their partnership with the government and avoid conflicts of interest.

Primary dealers “have the duty to safeguard the partnership with the Indonesian government based on professionalism, integrity, the avoidance of conflict of interest, and looking at the interests of the Republic of Indonesia,” according to documents uploaded to the ministry’s website on Wednesday.

The documents, dated Dec. 30, said the finance minister can revoke the license of a primary dealer if it does not fulfill the stated conditions.

The finance minister also has the authority to accept or reject an application to be a primary dealer by taking into consideration the track record of the bank or securities firm, including its working experience with the ministry.

The Indonesian government cut its business ties with JPMorgan Chase & Co following a November downgrade by the U.S. bank in its Indonesian stocks recommendation to “underweight” from “overweight.”

(Reporting by Eveline Danubrata and Gayatri Suroyo; Additional reporting by Fransiska Nangoy; Editing by Richard Borsuk)


http://www.globalcapital.com/article/b116xn849sf6tr/jp-morgan-frozen-out-indonesia-needs-to-let-it-go
JP Morgan frozen out? Indonesia needs to let it go
By Morgan Davis , 10 Jan 2017

Indonesia’s tiff with JP Morgan has brought the country unwelcome attention. While it is right to protect its own markets from instability, doling out punishments to the US bank undermines its reputation as a sophisticated, transparent country – qualities that could deter the international investors it has so successfully attracted.

Last Tuesday, the Indonesian finance ministry said it was {cutting its business links with JP Morgan} as the lender’s comments could harm its financial system.

The comments in question were made in November, when JP Morgan cut its recommendation for Indonesian equities to underweight from overweight. Their reasoning was “tactical” and came in response to the impact on emerging markets from Donald Trump’s victory in the US election, said the report. In the same note, Brazil was also downgraded from overweight to neutral.

The research might well have easily been lost in the mountain of end of year outlooks and opinion pieces written by every bank. But Indonesia’s heavy handed approach to JP Morgan’s analyses has ensured it has captured the market’s attention.

The ministry of finance first said that large institutions need to be held responsible for the attitudes they create with their statements, with another senior official reportedly saying that JP Morgan’s research was not “accurate or credible”.

The result was that the government is understood to have suspended the bank as a primary dealer and underwriter of its domestic and international bonds from January 1, despite the report only dealing with the country’s equities market. A bank spokesperson told GlobalCapital Asia last week, and reiterated again on Tuesday, that its business in Indonesia continues to operate as usual and that it was working with the ministry to resolve the matter.

On top of that, the country is now understood to be planning regulations to ensure its primary bond dealers only produce “factual” research, with the rules expected to be released next week, according to media reports quoting Robert Pakpahan, the finance ministry’s director general for budget financing and risk management.

Spokespeople at the finance ministry did not respond to requests for comments in time for this article.

The amount of effort Indonesia has put into detracting negative reports has raised some concerns about what it’s trying to suppress, while also raising fears among other researchers that they too would be penalised for negative commentary.

Market watchers contacted by GlobalCapital Asia this week unanimously agreed that JP Morgan made the right call in standing by its analysis. But it is Indonesia’s reaction that has not only set a bad precedent for the region, but could also likely backfire.

For starters, Indonesia shouldn’t forget about the demographics of its investors. A huge chunk are international, which are already scrutinising emerging market investments in the wake of Trump’s election victory and the likelihood of more interest rate hikes. Indonesia is one of the Asian economies that is vulnerable to capital outflows.

In addition, Indonesia’s ruling could impact equity buyers, especially retail investors that rely on such research to better gauge their portfolio choices. If analysts are hesitant to provide critical views on the country’s stocks, there is a chance of investors jumping into equities with limited knowledge of the risks, and having their fingers burnt in the process.

Indonesian officials are only trying to safeguard their economy. And on the debt side, the consensus is that the government’s planned fundraising for the year is unlikely to be hurt given it is viewed as a savvy and well established bond issuer.

But Indonesia should not look complacent, even if it is viewed more positively when compared with other emerging markets in Asia. It is not the only country likely to face volatility in 2017 in the wake of global political uncertainty.

The country needs to go into the year by embracing its strengths, not making an investment bank the scapegoat for its perceived weaknesses and looking like it has something to hide.


http://www.wsj.com/articles/indonesia-issues-new-rules-for-bond-dealers-1484115985
Indonesia Issues New Rules for Bond Dealers
By I Made Sentana and Ben Otto
Jan. 11, 2017 1:26 a.m. ET


The new rules were unveiled a week after Indonesia severed ties with J.P. Morgan Chase over what officials said was a faulty equities downgrade. Photo: Reuters

Policy changes demand that bond partners recognize a duty to act in the Southeast Asian nation’s interests and avoid conflicts of interest in working with the government

JAKARTA, Indonesia-Indonesia unveiled new rules demanding that bond partners recognize a duty to act in the Southeast Asian nation’s interests and avoid conflicts of interest in working with the government, a week after severing ties with J.P. Morgan Chase & Co. over what officials here said was a faulty equities downgrade.

In changes to a policy on primary dealers’ obligations made public Wednesday, Indonesia’s Finance Ministry added several clauses, including one stating that dealers must “maintain the partnership with the Indonesian government based on professionalism, integrity, the avoidance of conflict of interests and upholding the interests” of Indonesia.

The documents, effective Dec. 30, said the ministry can revoke primary-dealer status after sending three warning letters to a participating financial institutions or if a dealer ranks lowest in performance for two consecutive evaluation periods. Dealers who lose their primary-dealer status may reapply after 12 months.

The Finance Ministry appoints banks and securities firms as primary dealers to buy government bonds in auctions and then resell them in the secondary market. Nineteen financial institutions are on the list after the ministry cut business ties with J.P. Morgan for releasing in November a downgrade of Indonesian equities that officials said lacked credibility and could destabilize the country’s financial system.

J.P. Morgan has said it is working toward a resolution with the Finance Ministry. The bank said its business in Indonesia continues to operate as usual and that the effect on clients is minimal.

The altered regulation doesn’t mention market reports produced by primary dealers’ research teams, but the message is clear that the government wants financial institutions to act credibly, including by issuing research that must be based on economic data, said Josua Pardede, an economist with Bank Permata, one of the primary dealers.

He said he understands the government’s concerns given that the outlook for budget financing remains difficult this year and that he doesn’t expect the new rules to affect analysts’ ability to produce independent research

Write to I Made Sentana at i-made.sentana@wsj.com and Ben Otto at ben.otto@wsj.com

Related Coverage
Indonesia: J.P. Morgan Was Tasked to Find Buyers, But Instead Said ‘Sell’ (Jan. 4)
Indonesia Cuts Ties With J.P. Morgan Over Downgrade (Jan. 3)
Indonesia Urges Bond Dealers to Issue Credible Research Reports (Jan. 9)

http://www.wsj.com/articles/indonesia-cuts-ties-with-j-p-morgan-over-downgrade-1483434650
http://www.wsj.com/articles/indonesia-plans-new-rules-for-market-reports-after-j-p-morgan-downgrade-1483859960
http://www.wsj.com/articles/indonesias-message-to-j-p-morgan-accentuate-the-positive-1483517864
http://www.wsj.com/articles/indonesia-urges-bond-dealers-to-issue-credible-research-reports-1483950941

Indonesia Cuts Ties With J.P. Morgan Over Downgrade
Indonesia Plans New Rules for Market Reports After J.P. Morgan Downgrade
Indonesia: J.P. Morgan Was Tasked to Find Buyers, But Instead Said ‘Sell’


http://www.businessinsider.com/r-indonesia-finance-ministry-issues-new-rules-for-bond-dealers-2017-1?IR=T&r=US&IR=T
Indonesia finance ministry issues new rules for bond dealers
Reuters, 5h 2

JAKARTA, Jan 11 (Reuters) – Indonesia’s finance ministry announced new rules that require primary bond dealers to “safeguard” their partnership with the government and avoid conflicts of interest.

Primary dealers “have the duty to safeguard the partnership with the Indonesian government based on professionalism, integrity, the avoidance of conflict of interest, and looking at the interests of the Republic of Indonesia,” according to documents uploaded to the ministry’s website on Wednesday.

The documents, dated Dec. 30, said the finance minister can revoke the license of a primary dealer if it does not fulfill the stated conditions.

The finance minister also has the authority to accept or reject an application to be a primary dealer by taking into consideration the track record of the bank or securities firm, including its working experience with the ministry.

The Indonesian government cut its business ties with JPMorgan Chase & Co following a November downgrade by the U.S. bank in its Indonesian stocks recommendation to “underweight” from “overweight”. (Reporting by Eveline Danubrata and Gayatri Suroyo; Additional reporting by Fransiska Nangoy; Editing by Richard Borsuk)


http://www.businessinsider.co.id/jp-morgans-guide-to-the-markets-q1-2017-2017-1/
JPMorgan’s complete guide to everything happening in the markets
Prashanth Perumal Markets, Jan. 6, 2017, 3:49 AM


Screen Shot 2017 01 05 at 1.22.05 PM
JP Morgan Asset Management

2017 promises to be an exciting year for markets with Donald Trump all set to move into the White House in a couple of weeks.

Markets, it seems, expect him to make sweeping changes to policy, but there is considerable doubt whether the euphoria will last very long.

A whole bunch of risks from 2016 of course carry over into 2017, from currency and debt worries in China to lackluster growth in the US and Europe.

JPMorgan provides a guide to make sense of all these, and a whole lot more as we travel through the first quarter of 2017.

Thanks to JPMorgan Asset Management for giving us permission to feature this presentation.
https://am.jpmorgan.com/us/en/asset-management/gim/adv/insights/guide-to-the-markets

https://am.jpmorgan.com/blob-gim/1383280028969/83456/jp-littlebook.pdf?segment=AMERICAS_US_ADV&locale=en_US


https://www.wsj.com/articles/how-j-p-morgan-won-then-lost-indonesias-business-1486904402?mod=e2tw
How J.P. Morgan Won, Then Lost, Indonesia’s Business
By Ben Otto, Rachel Rosenthal and I Made Sentana
Updated Feb. 13, 2017 3:48 p.m. ET


Indonesia Finance Minister Sri Mulyani Indrawati wrote a letter to J.P. Morgan’s Indonesia head, saying the government was breaking ties with the bank. Photo: zach gibson/Agence France-Presse/Getty Images

The New York bank ran up against expectations that its research reports on the country should be positive

On the Sunday after Donald Trump won the U.S. presidential election, sparking turmoil in emerging markets, J.P. Morgan Chase & Co. downgraded Indonesia’s stock market. The move set off a chain reaction that resulted in the New York bank losing Indonesia as a client.

J.P. Morgan tried to smooth relations with Indonesia, as it had done several times in the past. At stake for the bank was a lucrative and decades-long partnership. Bank executives spoke with officials through back channels, pushed for meetings and pointed to subsequent reports with more-positive views on Indonesia’s economy, said several people familiar with the efforts.

Analysts turned over to the finance ministry past market-research reports, and higher-level managers began to sign off on Indonesia research, according to one of the people. In January, the bank’s analysts partly reversed their Indonesia equities call, bumping their recommendation up to “neutral” from “underweight.”

But Indonesian officials were unmoved. They insisted that banks like J.P. Morgan, which were primary dealers for government-bond sales, have a responsibility to support the interests of the Southeast Asian nation. They were open to criticism, the officials said, but they felt J.P. Morgan’s report wasn’t accurate or credible. Indonesia’s finance ministry declined to comment for this article.

Investments banks have long weathered complaints that their research departments, which make calls on stocks, bonds and other assets, aren’t truly independent from their investment-banking operations, which pitch deals to companies and governments.

Related Coverage
J.P. Morgan Reverses Course on Indonesia Stocks (Jan. 16)
Indonesia Issues New Rules for Bond Dealers (Jan. 11)
Indonesia Plans New Rules for Market Reports (Jan. 9)
Indonesia: Tasked to Find Buyers, J.P. Morgan Said ‘Sell’ (Jan. 4)
Indonesia Cuts Ties With J.P. Morgan Over Downgrade (Jan. 3)

But in Indonesia, and other parts of Asia, government officials’ expectations for positive research are unabashed and unapologetic. That means global banks walk a fine line when publishing research their investment-banking clients don’t like.

In Asia, some bankers say they are routinely quizzed about their research teams’ reports when bidding for government business. In Indonesia, central-bank employees roam trading rooms, urging traders to be patriotic by refraining from selling the rupiah when the currency is under pressure, traders say.

A Bank Indonesia spokesman confirmed the bank sends officials to trading rooms during times of heavy selling pressure on the rupiah. He said he doesn’t know what they say to dealers.

Rarely is the push to be positive as pronounced—and public—as it was with Indonesia’s reaction to J.P. Morgan’s November report. Nor are the consequences typically as severe.

J.P. Morgan lost its Indonesian primary-dealer and underwriting business for government bonds, as well as its ability to receive payments made under the country’s tax-amnesty program.

The dealer role gave J.P. Morgan important visibility into the much larger business of matching buyers and sellers of Indonesian government debt and currency, which brings in an estimated tens of millions of dollars in revenue for J.P. Morgan each year, analysts say. The bank can still trade government bonds and the rupiah, as well as continue to underwrite stock and debt for private companies.

J.P. Morgan says that its Indonesia business is operating as usual, that impact on clients from the government ban is minimal and that it is working with the finance ministry to resolve the matter.

J.P. Morgan’s first big run-in with Indonesia came after the collapse of Lehman Brothers in 2008, when lawmakers there blamed a bank recommendation to sell rupiah-denominated government bonds for accelerating a flow of money out of the country. Officials under Finance Minister Sri Mulyani Indrawati, a well-regarded, U.S.-trained economist who was almost three years into her first stint in the job, were primarily worried about controlling market reaction to the report, according to a person familiar with the matter.

Shortly thereafter, J.P. Morgan presented the ministry with a plan on how the bank would handle negative press and control the release of future reports, the person said, and flew in its Asia Pacific chief to meet with Indonesia’s vice president.

Ms. Mulyani didn’t publicly penalize J.P. Morgan. The bank’s analysts toned down the language in Indonesian bond reports, changing “sell” calls to recommendations to reduce portfolio weighting, a person familiar with the research said.

In 2015, during the market tumult that followed a Chinese move to effectively devalue the yuan, the bank again lowered its investment recommendation on rupiah government bonds. A new finance minister, Bambang Brodjonegoro, called the move “unethical” and threatened sanctions, including, he joked, 100 push-ups.

Haryanto Budiman, a 48-year-old veteran of McKinsey & Co. and Indonesia’s largest state bank who had become J.P. Morgan’s local chief four years before, led a blitzkrieg response, said people familiar with the matter. Mr. Budiman and colleagues met and texted with longtime friends and former colleagues at Bank Indonesia, the finance ministry and the financial-sector regulator. Mr. Brodjonegoro was eventually appeased, and recalls telling Mr. Budiman to be careful about research.

By the time Mr. Trump’s election roiled emerging markets, Ms. Mulyani was back as finance minister, charged with building credibility for Indonesia’s financial system. On the Friday after the election, the rupiah dropped as much as 2.7%, the Indonesian stock market fell 4% and Bank Indonesia poured an estimated $1 billion into rupiah purchases and bond buybacks. Behind the selloff were investor worries that emerging-market economies would suffer from Mr. Trump’s protectionist trade policies, a strengthening U.S. dollar and outflows due to rising U.S. interest rates.

On the Monday after J.P. Morgan’s equities downgrade, a media story on the report began circulating “like a virus” on WhatsApp, one Indonesian banking executive said. The stock market slid another 2%. Ms. Mulyani, who had flown to Africa to attend a climate-change conference in Marrakesh, Morocco, canceled meetings and returned to Asia, people with knowledge of the matter said.

On Tuesday morning, Ms. Mulyani’s officials called one of the report’s co-authors to quiz him about the downgrade, according to people familiar with the call. J.P. Morgan’s Mr. Budiman was out of the country and tried to soothe tempers from abroad, one of the people said.

Ms. Mulyani declined to comment for this article.

Before the week was out, with the stock market, rupiah and bonds all down steeply, Ms. Mulyani wrote to Mr. Budiman. In the letter, she said Indonesia was cutting ties with the bank, according to people familiar with the letter.

Western diplomats met Indonesian finance ministry representatives to explain the division between research and investment banking and were told: “Yes, but they are the same. They are J.P. Morgan,” according to a person briefed on the conversation.

On Jan. 12, Ms. Mulyani hosted a meeting with analysts and economists. At the meeting, she cautioned them to be careful with their research reports, according to several attendees.

Since the meeting was only for primary dealers, J.P. Morgan wasn’t invited.

Write to Ben Otto at ben.otto@wsj.com, Rachel Rosenthal at Rachel.Rosenthal@wsj.com and I Made Sentana at i-made.sentana@wsj.com


the New York bank losing Indonesia as a client https://www.wsj.com/articles/indonesia-cuts-ties-with-j-p-morgan-over-downgrade-1483434650
bumping their recommendation up to “neutral” https://www.wsj.com/articles/j-p-morgan-raises-rating-on-indonesian-stocks-1484564078
have a responsibility to support the interests of the Southeast Asian nation https://www.wsj.com/articles/indonesia-issues-new-rules-for-bond-dealers-1484115985
aren’t truly independent https://www.wsj.com/articles/new-wall-street-conflict-analysts-say-buy-to-win-special-access-for-their-clients-1484840659
the collapse of Lehman Brothers in 2008 https://www.wsj.com/articles/SB122145492097035549
a Chinese move to effectively devalue the yuan https://www.wsj.com/articles/china-moves-to-devalue-the-yuan-1439258401
roiled emerging markets https://www.wsj.com/articles/emerging-market-stocks-currency-shudder-after-trump-victory-1478691751
Ms. Mulyani was back as finance minister https://www.wsj.com/articles/reformer-finance-minister-sri-mulyani-confronts-a-new-indonesia-1469778961
Bank Indonesia poured an estimated $1 billion into rupiah purchases and bond buybacks. https://www.wsj.com/articles/bank-indonesia-rupiah-fall-due-to-worries-about-u-s-protectionism-1478846510
J.P. Morgan Reverses Course on Indonesia Stocks https://www.wsj.com/articles/j-p-morgan-raises-rating-on-indonesian-stocks-1484564078
Indonesia Issues New Rules for Bond Dealers https://www.wsj.com/articles/indonesia-issues-new-rules-for-bond-dealers-1484115985
Indonesia Plans New Rules for Market Reports https://www.wsj.com/articles/indonesia-plans-new-rules-for-market-reports-after-j-p-morgan-downgrade-1483859960
Indonesia: Tasked to Find Buyers, J.P. Morgan Said ‘Sell’ https://www.wsj.com/articles/indonesias-message-to-j-p-morgan-accentuate-the-positive-1483517864
Indonesia Cuts Ties With J.P. Morgan Over Downgrade https://www.wsj.com/articles/indonesia-cuts-ties-with-j-p-morgan-over-downgrade-1483434650

 

 


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