World’s Best Stock Market This Year Comes With a Huge Asterisk

(Bloomberg) -- The world’s best-performing stock market returned an astounding 3,883 percent this year.

Sort of.

The surge in Venezuelan equities mostly reflects a 97 percent currency devaluation on the black market and runaway inflation. But an official government exchange rate stayed fixed at 10 bolivars to the dollar, creating the illusion of astronomical returns and distorting valuations to the point that some Venezuelan companies had market capitalizations that exceeded behemoths such as Apple Inc.

At the black-market rate that most Venezuelans use to access hard currency, stocks have gained a respectable but much less impressive 18 percent. That allowed local investors -- and they’re almost all local, since it’s so difficult to get money in and out of the country -- to partially protect their savings from the economic chaos that’s engulfed the nation. Gross domestic product contracted a staggering 16.5 percent last year, while Bloomberg’s Cafe Con Leche Index puts inflation at an annual pace of 7,000 percent over the past six months

“If you had stayed just with the bolivars, they turned to zero,” said Francisco Rodriguez, the chief economist at Torino Capital, a broker-dealer that’s largely focused on Venezuela. “It’s really striking.”

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