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UPDATE 2-Indonesia bars JPMorgan from next dollar sukuk issuance - official
January 9, 2017 / 9:39 AM / 7 months ago

UPDATE 2-Indonesia bars JPMorgan from next dollar sukuk issuance - official

* Indonesia has asked other banks to submit proposal for USD sukuk

* Govt plans rule to ensure 'factual' research by bond dealers

* Govt has met with bond dealers about the planned rule - official (Adds in 5th paragraph that JPMorgan declined to comment.)

By Hidayat Setiaji and Gayatri Suroyo

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

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