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This Asia market was the surprise outperformer this year

Donald Trump's surprise U.S. election win put the kibosh on a late year market rally in Asia, but Pakistan shares still managed to be the region's 2016 star outperformer.

The "Trump Tantrum" spurred outflows from emerging markets globally. The selloff was partly driven by expectations the incoming administration would pursue more fiscal spending, implying higher U.S. interest rates, higher inflation and a stronger dollar. That would hurt the ability of emerging-market companies to service dollar-denominated debt and spurred outflows from the segment on the prospect of higher, less-risky returns on Treasurys.

At the same time, Trump's aggressive campaign rhetoric, particularly against China and Mexico, had indicated he might pursue a trade war, which would be negative for Asia's export-dependent nations.

But despite the tantrum dampening Asia markets, shares in Pakistan surged, even though the country briefly faced its own Trump moment. In early December, the country's government reported that the president-elect told Prime Minister Nawaz Sharif that he was willing to play "any role that (Sharif wanted him) to play" to resolve Pakistan's problems. The remarks, if accurate, could aggravate hostility between arch-enemies Pakistan and India.

Even with the hiccups, the Karachi All-Share Index had surged more than 45 percent for the year before Friday's open, making it among the world's best-performing markets.

The gains were driven in part by expectations for the market to regain the "emerging market" label.

In 2008, the Karachi Stock Exchange was demoted to frontier market status, from emerging market, by MSCI after the exchange had imposed a market floor rule, which prevented shares from falling, in response to gyrations caused by the global financial crisis.

But MSCI announced mid-year that Pakistan would regain the emerging-market classification in the middle of 2017, indicating operational improvements and increased availability for foreign investors, Credit Suisse noted in a report in December.

The investment bank also noted that surveys have shown positive changes in sentiment over the government's economic competence over the past three years.

Credit Suisse, which still ranks Pakistan as a frontier market, noted that the country has a cluster of "highly profitable value-creative corporates," outperforming most of its frontier-market peers.

Darren McCollester | Newsmakers | Hulton Archive | Getty Images

Thailand was another outperformer among Asia's stock markets, with the SET index climbing more than 19 percent in 2016, before Friday's open. That was despite the country's beloved king, Bhumibol Adulyadej, dying in October.

Some analysts had feared his passing would spur political turmoil, as he had acted as a stabilizing influence amid the country's coup by a military junta and as successor Crown Prince Maha Vajiralongkorn failed to command the same devotion as his father.

But the country's one-year morning period appeared to be proceeding with relative calm.

Analysts at CIMB said in an early December note that they expected the Thai market to remain a safe haven as the country's economy had seen its trough and the election, due in the fourth quarter of next year, would likely alleviate political uncertainty.

CIMB also expected the baht to remain relatively stable, even as the stronger dollar weighed regional peers, as the country enjoyed a large current account surplus.

Vietnam's market also posted a strong year, with the VNI rising nearly 15 percent for 2016, before Friday's open, despite expectations that the Trans-Pacific Partnership trade deal, of which the country would have been a major beneficiary, was dead-on-arrival after Trump's election. Trump had campaigned on a vow to kill the deal.

But UOB said in an early December note, "Vietnam's export outlook is still positive having concluding bilateral trade agreements with South Korea and the European Union."

Credit Suisse's note also pointed to Vietnam as offering "highly profitable value-creative corporates."

Stocks in Indonesia also climbed for the year, with the Jakarta Composite up more than 15 percent for the year, before Friday's open.

In an early December note, Nomura called Indonesia's stock market a strong reform and growth story and remained overweight. It noted that in 2016, the market benefited from a tax amnesty program, which helped to repatriate funds into the country as well as expectations of infrastructure spending.

"A domestic demand-led (both consumption and investment) recovery is coming up, and we expect equity earnings to perform similarly – sustaining upside," Nomura said.

Analysts have also noted that Indonesia will likely be less vulnerable to any potential Trump trade war as it wasn't particularly export dependent.

But the curse of 2016 struck markets on China's mainland, the region's worst performers for the year, with the Shanghai Composite dropping 12.52 percent for 2016, before Friday's open.

China's shares took a hit from a combination of a weaker yuan, continued capital outflows from the mainland and concerns that Trump might start a trade war.

India's shares have also performed poorly, with the Sensex index edging up around 1 percent for the year, before Friday's open, after shedding around 5.6 percent in 2015.

The subcontinent's shares took a mid-year hit after the introduction of a demonetization program, which will remove 500 and 1,000 rupee bank notes from the financial system, or around 86 percent of its currency.

While analysts generally believe the program will be a positive longer term as it puts the kibosh on some black market activity, in the short term, demonetization will likely sideswipe economic growth and corporate earnings.

Nyshka Chandran, Saheli Roy Choudhury and Huileng Tan contributed to this article.

—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1

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