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Liquidity refers to the ease by which an investment can be converted into cash. The concept embraces both speed and price. In deep, liquid markets, assets can be sold very quickly with very little price impact.

In South Africa, the JSE Limited is regarded as a liquid market, with many buyers and sellers transacting huge sums daily. That said, not every stock is liquid. Some small and microcap stocks have very little free float and do not often trade. Small trade volumes can produce large price swings.

The JSE’s debt markets are very liquid and well developed in terms of number of participants and daily trade. South African government bonds account for most of the average R15 billion of debt instruments traded daily. It is quite easy to sell a well-traded bond instrument quickly into the market in large quantities with very little, if any, price impact.


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