The tiny Costa Rican exchange was the stock market star of 1998, soaring in value by almost 90 per cent - six times greater than the percentage gain in the UK's FTSE 100.
Easdaq, the fledgling European market for high-technology stocks, came a close second, gaining almost 80 per cent. Anyone who put their money in Finnish equities should also have come up smelling of roses. The Hex General index soared by 50 per cent, far outperforming stock markets elsewhere in Scandinavia.
The key to the success of Costa Rica - as well as several other smaller emerging equity markets such as Panama, Ghana and Morocco - was that investors were forced to look for new sources of high returns after the collapse of equity markets in the more familiar emerging economies such as Brazil and Mexico. The relative illiquidity of these smaller markets was another important factor.
Michael Hughes of Baring Asset Management said: "People are moving away from the core emerging markets and looking at markets they were not allowed to invest in or were not interested in before."
Another leading analyst said: "Costa Rica is a tiny market, and so its stock market index can be affected by small trades. Combine that with the fact that it's never had much investor interest before, and you can see how a few big buyers coming in can really move the market."
High-technology stocks were one of 1998's success stories. Nasdaq, the US high-tech market, had a good year - the benchmark Nasdaq composite index was up by almost 40 per cent. But it was outdone by companies listed on Easdaq, Nasdaq's European equivalent. Investors realised there was value to be had in telecommunication and IT companies based in Europe.
Mr Hughes said: "Internet usage began to explode in 1998, and a lot of telecoms stocks - which benefited from increased Internet connections - did well."
The boom in European high-tech stocks helped Finland where Nokia, the mobile phone company, accounts for 50 per cent of the market. But this was not the only reason why Finnish stocks boomed - the advent of economic and monetary union in Europe also played a role.
Sharda Persaud at Paribas said: "At the start of 1998, there were a lot of things people didn't know about Finland. One of these was whether Finland was going to make the first round of EMU. Once Finland was linked to the EMU block it did well."
The "EMU effect" was also good news for Italy, Spain and Greece. In Italy and Spain, which will both participate in the first wave of currency union, key stock market indices gained more than 30 per cent. And although Greece will not participate in EMU's first wave, it is expected to join within a few years, a perception that helped send the market up 70 per cent.
Smaller markets such as Costa Rica and Panama aside, Latin American stock markets took a pounding in 1998. The Brazilian Bovespa index fell by 30 per cent as investors fretted about devaluation. Falling crude oil prices hit shares in Venezuela and Mexico, both of which rely on oil revenues.
One strategist said: "Venezuela is an oil exporter and its revenues have collapsed. There was also the election of a new president and there has been a lot of uncertainty about what his policies might be."
Asian stock markets, most of which had a terrible time in 1997, performed slightly better in 1998. That said, however, most major Asia-Pacific exchanges ended down on the year, with Chinese stocks among the worst hit. China's Shanghai B index lost around 50 per cent of its value amid worries about slower economic growth and devaluation. And the illiquidity of the Chinese market meant that a few sellers were able to send the market tumbling, just as a few large buyers in Costa Rica were able to send shares sky- high.
South Korea was the notable exception to the Asian gloom. The market soared by almost 50 per cent, making it one of the biggest gainers of 1998. This was a reflection both of the extent of the falls in late 1997, and the huge efforts made by the government to turn the economy round.
Mr Hughes said: "South Korea has changed its macroeconomic policies quickly and there is support around for it."
The worst-performing market was Russia. The benchmark RTS index slumped almost 90 per cent in a year which saw the world's eighth-largest economy default on its debt, devalue its currency and print money with abandon. And with hyperinflation beckoning, along with worries over further debt defaults and continued political uncertainty, analysts are gloomy about the prospects for Russia in the coming year.
The dream equity market in 1998, therefore, would have been a small emerging economy with European links and a big share of high-technology companies.
But those hoping to make a high return in 1999 should note those classic words of investment wisdom: past returns are no guide to future performance. Except possibly in Russia.Reuse content