World’s Best Stock Rally This Year Was Really Just an Illusion

  • Venezuelan benchmark’s 114% surge tops 94 indices globally
  • But gain masks what really happened -- a massive currency drop

Markets Winners and Losers: A Look Back at 2016

Data showing the Caracas Stock Exchange posted the world’s biggest advance in 2016 isn’t to be trusted. That 114 percent rally is a fiction.

Here’s what’s going on: Venezuela’s currency, the bolivar, has been in freefall this year as locals seek to get their hands on greenbacks amid a brutal recession, political upheaval and soaring inflation. (Our Cafe Con Leche Index puts the annual rate at 1,100 percent.)

The bolivar has weakened a world-beating 73 percent this year to about 3,100 per dollar, according to website dolartoday.com. But the government’s official foreign-exchange rate has been locked at 10 per dollar since March, and that’s the rate used to calculate the stock market’s value.

So Caracas stocks appear to gain as the bolivar loses its value in the black market. Owning stocks in companies such as Banco Bilbao Vizcaya Argentaria SA’s local unit is just a way for middle-class Venezuelans to try to protect their assets from the devaluation. Foreigners are almost completely absent from Venezuela’s stock market because of the difficulty they would have getting money out of the country legally.

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