Here it is…the world’s top-performing index in 2013

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Getty Images

Japan’s Nikkei index may have clocked its biggest annual gain in over 40 years, but it wasn’t 2013’s best performing stock index.

That honor was claimed by Venezuela’s benchmark IBC Index. It lists the Caracas Stock Exchange’s 11 most liquid and highly capitalized stocks traded and appreciated a whopping 480 percent this year.

But the IBC is no stranger to bumper gains. It was also the world’s best performing exchange last year, with a rise of 303 percent, and gained 79 percent in 2011.

(Read more: Venezuela after Chavez: An economy on the verge)

Banking stocks boosted the index this year, with the Mercantil Servicios Financieros and the Banco Nacional de Credito logging rises of 593 percent and 921 percent, respectively. Plus, shares in telecom firm Nacional Telefonos de Venezuela rose by 218 percent.

But these stellar gains come at a time of uncertainty and change for the country. The country’s fiery socialist leader, Hugo Chavez, died in March, leaving Venezuela on the verge of an economic breakdown.

Inflation is astronomic, soaring to 56.2 percent this year, according to government estimates. The Venezuelan Bolivar – which is pegged against the U.S dollar – is drastically losing value in the black market and foreign currency reserves are dwindling. Widening credit default swap (CDS) spreads in 2013 indicate investors view Venezuela as increasingly likely to default on its sovereign debt.

(SlideshowThe world’s best performing frontier markets)

Given this, Michael Ganske, head of emerging markets at Rogge Global Partners, said the IBC’s performance this year was nothing short of a “miracle”.

“The macro story and politics are going in the wrong direction,” he told CNBC via email. Ganske said Venezuela’s economy was extremely weak and that the country’s new leader, Nicolas Maduro, was losing his grip on the leadership, due to the economic deterioration and his lack of charisma when compared with Chavez.

(Read MoreYen set for worst year since YMCA topped the charts)

Venezuela does however possess vast oil reserves – only rivaled by those of Saudi Arabia, according to the U.S. Energy Information Administration.

“Venezuela is basically an oil play,” Ganske said, indicating this provided some stability as the global economic recovery played out. He added that state-control meant Venezuelan banks might also have benefited from cashflows from the oil industry.

(Read MoreBlackout briefly darkens Venezuela’s capital)

Gankse warned that investors in the IBC might not see the same stellar gains in 2014, with low market capitalization and liquidity also driving the market this year.

“We should expect the same disappointment for 2014, with a potential risk of FX devaluation and/or escalation of political frictions,” he said. “I would say taking profit would be a prudent strategy if one has been so lucky to ride on the 2013 performance wave.”

By’s Matt Clinch. Follow him on Twitter @mattclinch81.

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