Indonesia Urges Bond Dealers to Issue Credible Research Reports

By I Made Sentana and Ben Otto 

JAKARTA, Indonesia--Indonesian finance officials on Monday summoned primary dealers of the country's rupiah-denominated government bonds to tell their research departments be careful when issuing market reports, a week after the government severed ties with J.P. Morgan Chase & Co. over what officials said was a faulty equities downgrade.

In a morning meeting, officials of the Ministry of Finance directorate general of budget financing and risk management told primary dealers that market research reports could say anything about Southeast Asia's largest economy, but shouldn't create "false perceptions at the expense of Indonesia," according to a bank representative present at the meeting who spoke to The Wall Street Journal on condition of anonymity.

Officials also asked primary dealers to be careful in their market reports about specifying what is factual research and what is opinion, and asked that analysts contact the ministry before issuing reports if they have any doubts about data, the bank representative said. Representatives from separate banks who were briefed on the meeting corroborated the points.

"We asked them to help the government by issuing credible research," Suahasil Nazara, head of the ministry's fiscal policy office, told reporters after the meeting. He declined to provide details about the directives, but said the ministry also spoke with primary dealers about the outlook for 2017.

A bank representative briefed on the meeting said the government said that it is also considering revising its policy on the rights and obligations of primary dealers.

The discussion Monday stemmed from a Nov. 13 report about the global repercussions of Donald Trump's election victory in the U.S., in which J.P. Morgan downgraded its rating on Indonesian equities to underweight from overweight, saying that a rise in bond-market volatility "increases emerging-market risk premiums." The largest U.S. bank by assets also made smaller downgrades to Brazilian and Turkish equities.

Indonesian finance officials said last week that the research lacked credibility and could destabilize the country's financial system. The government cut its business partnerships with J.P. Morgan, including removing the bank from a list of primary dealers for government bond auctions. 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.

J.P. Morgan has said that 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.

Ministry of Finance officials said over the weekend that they could begin discussing new policies this week for the 19 financial institutions that are primary dealers for the government's domestic bonds.

Write to I Made Sentana at [e-mail] and Ben Otto at [e-mail]

(END) Dow Jones Newswires

January 09, 2017 03:50 ET (08:50 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.