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Stock markets could tumble and foreign investors look elsewhere if the Bank Century bailout saga ends with the removal of the nation’s two key economic policy makers, Finance Minister Sri Mulyani Indrawati and Vice President Boediono, analysts said on Monday.

Budi Ruseno, an analyst at PT HD Capital, said the rising political tension created by the Century controversy was already making market players nervous.

“Investors have been extra careful about investing in stocks recently,” he said.

Budi noted that the average trading values on the Indonesia Stock Exchange (IDX) had fallen sharply in the past two weeks as the recriminations over the Rp 6.7 trillion ($710.2 million) bailout of the bank have escalated.

The average daily value of trades on the exchange fell to Rp 2.7 trillion last week, compared to Rp 3.7 trillion a week earlier, according to IDX data.

“Some investors have adopted a wait-and-see stance until questions about the bailout are resolved,” Budi said.

In recent weeks analysts have predicted the imminent demise of Boediono, who was central bank governor at the time of the Bank Century bailout in November 2008, and Sri Mulyani, who backed the decision to save the troubled lender.

The Corruption Eradication Commission (KPK) and the House of Representatives are both investigating the bailout amid accusations that money from the bank flowed into the coffers of the Democratic Party or illegally found its way back to businesspeople with government connections.

Boediono and Sri Mulyani are respected technocrats but analysts say they are vulnerable because they do not have strong political bases.

Halim Susanto, the president director of PT OSK Nusadana Securities, warned that the stock market could plunge in the short term if the pair were removed from the cabinet.

Paulus Irwan Sutisna, Citibank Indonesia’s director for transnational corporate investment, noted that while foreign investors have not raised serious concerns about the Bank Century battle yet, this would change if Sri Mulyani and Boediono lost their posts.

“Sri Mulyani and Boediono are both well known and trusted by foreign investors, so if they were to lose their posts, I believe lots of question will be raised by these investors,” Paulus said.

PT Bank Mandiri’s chief economist, Mirza Adityaswara, said domestic investors would continue to monitor the Bank Century investigations and fallout. He said he hoped that the country’s lawmakers and the public would examine the problem as rationally as possible.

“Don’t politicize this thing,” he warned.

There has been persistent speculation that figures within the Golkar Party, led by businessman Aburizal Bakrie, as well as other members of President Susilo Bambang Yudhoyono’s coalition government, are plotting to oust the vice president and finance minister in the hope of promoting their own nominees to these powerful positions.

Jakarta Globe