BEST INVESTMENTS IN THE WORLD

World's 5 hottest stock markets

Small emerging markets like Nigeria and Egypt have delivered stellar stock market performances this year.

A number of stock markets around the world have delivered solid performances this year, but if you look at the standouts, there's a common thread: they're all small emerging markets."The best performing markets been those that are least affected by outside events," said Bill Rocco, senior fund analyst at Morningstar. "And they've enjoyed good local economic and political news."For example, Turkey has been the bright spot in Europe, which continues to suffer from its almost three-year-old debt crisis, while Egypt is still recovering from the Arab Spring.While most of the top-performing markets are still small when it comes to liquidity and volume, they're starting to gain positive attention from investors, fund managers and rating agencies.Click through to see which five stock markets have returned the best gains so far this year and why.

5. Nigeria

YTD gain: 31%

Africa's second-largest economy has continued to grow at a rapid pace this year, with economic growth clocking in upwards of 6% each quarter in 2012.The market got its most recent lift after Standard and Poor's and Moody's lifted Nigeria's credit rating, bringing it in line with Fitch's to three notches below investment grade, citing improved financial stability and the country's commitment to reforming the banking and electricity sectors.In fact, Nigeria's banks have been among the best performers on the country's stock exchange. First Bank of Nigeria is up a whopping 70%, while Zenith Bank and Guaranty Trust Bank have both gained about 40% this year.

Nigeria is also starting to attract more attention from foreign investors, which analysts expect will only grow with the country's recent entry into Barclays' and JPMorgan's benchmark emerging markets bond indices."These events should spur additional capital flows into Nigeria, said Larry Seruma, managing principal at Nile Capital Management. Seruma manages the Nile Pan Africa Fund (NAFAX), the only U.S. mutual fund to focus exclusively on the continent of Africa. Nigeria accounts for about 40% of the fund.

NEXT: 4. Pakistan

YTD gain: 33%

Karachi's benchmark index has soared to historic highs this year on healthy volume, largely due to the State Bank of Pakistan's easing monetary policy.Through a series of moves, Pakistan's central bank has been able to cut its key interest rate to 10% from 12% at the start of the year, thanks to lower-than-expected inflation figures, said Naveed Vakil, director of research at AKD Securities.

As inflation keeps trending lower, analysts expect that Pakistan's central bank will continue cutting rates and eventually push its benchmark interest rate into the single digits. And that should help spur further gains in the country's stock market.A jump in consumer spending has also been a big driver of the stock market rally, said Vakil.Rural income has grown significantly thanks to larger remittances and stable prices for so-called soft commodities, such as cotton. In fact, overseas Pakistani workers sent home a record $1.4 billion in remittances last month, up more than 30% from a year earlier.The rise in spending has particularly helped companies like Bestway Cement, which benefits from a rise in homebuilding, and Engro Foods Limited, which gets a lift as people spend more money on food.

NEXT: 3. Turkey

YTD gain: 43%

Turkey and Greece may share borders, but their economies couldn't be further apart. While most counties in Europe have been roiled by the region's ongoing debt crisis, Turkey has remained a relative bright spot.Although Turkey's economic growth has slowed, it has avoided recession like some of its neighbors, thanks to strong exports. And GDP growth is forecast to pick up over the next couple of years. Plus, unemployment is at an 11-year low.Earlier this month, Fitch Ratings lifted Turkey's credit rating to investment grade for the first time in two decades, which sent the Istanbul stock exchange to record highs.Moody's, however, maintained its junk rating on Turkey in its most recent assessment, noting that while Turkey's financial strength has improved, it still faces short-term financing risks, and the government's efforts to address Turkey's economic imbalances will take time to take effect.

NEXT: 2. Egypt

YTD gain: 55%

Egypt's stock market has come roaring back this year, after tumbling more than 50% in 2011 amid political tension in the aftermath of the Arab Spring revolution.The market got a big boost in June, following a win by the Muslim Brotherhood's Mohamed Mursi in the country's first free presidential election.But the political situation in Egypt is still murky. It remains to be seen whether Egypt's new government will choose to implement Sharia law, the Islamic legal and moral code, and what kind of role it will take in Middle East conflicts, said Larry Seruma, managing principal at Nile Capital Management."The key overhang in Egypt is that its political situation continues to be one marked by uncertainty, and that makes investors nervous about how much to invest there," he added.

NEXT: 1. Venezuela

YTD gain: 219%

The Caracas stock exchange has staged a huge rally this year, with its benchmark exchange more than tripling in value since January.The gains have largely been driven by Venezuelan banks, including BBVA Banco Provincial, whose shares have climbed more than 200%.Venezuelan President Hugo Chavez threatened to nationalize the country's banks at the start of the year, but as it appeared less and less likely that Chavez would clinch his third six-year term as president, bank stocks surged and led the broader market higher, said Asha Mehta, portfolio manager at Acadian Asset Management.

Ever since Chavez wound up getting re-elected in early October, the market has backed of its highs.Mehta considers the Venezuelan stock market to be "uninvestable" due to the government's lack of support for free enterprise. Add to that a lack of liquidity and slim number of publicly traded stocks, and limited access to local markets for foreign investors.

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