The Colombo bourse continued its see-saw pattern with half the gains made on Wednesday being wiped out by the end of Thursday’s trading. The CSE’s benchmark ASPI fell by 10.4 points to close at 654.6, while the more sensitive MPI by 26.1 points to close at 1,112.8 points at the end of the day’s trading.

The market’s descent was contrary to predictions that the gains made on Wednesday (after three consecutive days of reversals), would continue for another day as well on Thursday. This was based on the premise that the dissolution of parliament (fears of which were adduced for the ‘decimation’ of the bourse during the past few days) in the event the UNF government, despite commanding a majority in the House, wishes it to be so, would however not necessarily take place, as the prerogative of making such a decision was vested in the executive, namely the president, and not with the government.

In the current context, with the opposition considered being weaker than the government, and also taking into account the vast amount of finance needed to campaign for a general election, sources said that if in the event the UNF led government made such a request (to dissolve parliament) to the executive, it was unlikely that she would accede to it.

Last year’s dissolution of parliament however was different, in that it was the then opposition that commanded a majority in the House and not the PA led coalition government. As such the then government was unable to pass any bills as they were in a minority in the House. Therefore the president had no option but to dissolve parliament then, the sources said.

However, the situation in the present context was different, they said. Their interpretation (that despite the likelihood that parliament will not be dissolved and fresh elections called for in the immediate future) for the descent of the bourse on Thursday was due to two reasons.

Those were the seemingly strained relations between the government and the executive continuing and also due to a ‘market correction’ taking place.

In the overall context, from the time the UNF government was elected to power last December, the market had been on the ascent. Therefore, in this context, it could be construed that Thursday’s decline could not be considered as a ‘bolt from the blue,’ the sources said.

‘After all, the US capital market grew by 400% over a continuous period of four years, only to see most of these gains wiped out in a year recently due to the current recession,’ they said. (PA)