Increased Investment Risk in Emerging Market Economies Following Donald Trump's Election

Following Donald Trump's election as President of the United States on November 9, 2016, global financial markets experienced uncertainty. Investment risk (CDS/Credit Default Swaps) in emerging markets increased due to concerns that Donald Trump's policies would be protectionist. Indonesia's investment risk (CDS) reached 262.48 on November 11, and the rupiah weakened to over Rp 13,800 per US dollar.

On November 13, 2016, JP Morgan released research on emerging markets titled "Trump Forces Tactical Changes." In this research, JP Morgan downgraded its investment recommendations for Indonesia, Turkey, and Brazil. JP Morgan recommended portfolio reallocation in Indonesia to investors, downgrading its investment recommendation from overweight (OW) to underweight (UW) by two levels. The Indonesian government considered this inaccurate and inconsistent with Indonesia's macroeconomic fundamentals. Indonesia's economic growth of 5 percent, exceeding that of other countries, was not factored into JP Morgan's recommendation.

The Indonesian government decided to terminate its cooperation with JP Morgan via a letter dated December 17, 2016. From January 1, 2017, JP Morgan was prohibited from receiving any Indonesian government revenue deposits from any source. In 2015, JP Morgan also angered the Indonesian government with its August 20, 2015 research recommending investors reduce their holdings of Indonesian government bonds.