Kuwaitis are playing for high stakes in a "parallel stock exchange" with the frenetic air of an upstart gambling casino. Its chips are shares in Persian Gulf-based companies that often exist only on paper.

This Souk Manakh, or "Weather Market," as it formally is known, may soon see a $30 billion stock crash. It would be the biggest to hit the Middle East, with potentially devastating consequences for this richly endowed gulf sheikdom and its billionaires and millionaires in oil.

Hundreds of Kuwaitis with idle millions of dinars and dollars go down to the market in the heart of downtown around noon and again at dusk to gamble on making a fortune before the widely feared crash comes.

Except for the rattle of prayer beads, the gurgle of waterpipes and the tinkle of tiny tea cups, Souk Manakh seems at first glance much akin to a Western stock market, with its brokers screaming out prices and buyers and agents scurrying.

But there is nothing quite like this anywhere else. This phenomenon of the Arab oil bonanza depends on Kuwaiti faith in family names and word of honor and has a set of unwritten rules no outsider seems to comprehend fully.

It is not only that Souk Manakh is illegal and outside government regulations of any kind. Basically, the market runs on paper money and the dealings are often in little more than phantom companies, according to bankers and diplomats who have followed the phenomenon.

The game works like this: Kuwaitis trade millions of shares each day with checks dated for payment a year, or even two years, from the time of the transaction. The buyers immediately re-market the stock at even higher prices, while the sellers take the checks to Kuwaiti banks, which accept them at a 10 to 20 percent discount.

For example, in a recent sale of 81,395 shares in the Gulf Investment Co., the going price per share was 2.50 Kuwaiti dinars, but the buyer agreed to purchase them at 4.95 dinars with a promise to pay the seller one year later.

The buyer took possession of the shares within two days without laying out a penny. He was then free to resell the same shares at an even higher price in the same way, cashing in the check for payment at a discount with his local bank.

Normally he will already have made a handsome profit on the resold shares, far more than he will have to pay out on the original purchase a year later.

In this manner, the price of gulf shares has been going higher and higher in frantic trading, with the volume of outstanding checks growing to enormous proportions.

This alone seems scary enough. But many of the companies whose stock is being traded are new and have no real activity yet, "not even a desk or phone," as one Western analyst put it. Whether some of them ever will is questionable. Nonetheless, the value of their shares has steadily soared, largely because of the "stock fever" that has caught up this nation of 1.2 million.

"Playing the market has become a national obsession here," remarked the analyst, who added with a note of awe, "We're alking about billions of dollars."

Souk Manakh analysts estimate that between 6 billion and 10 billion dinars, the equivalent of $21 billion to $36 billion, are now outstanding in checks tied up in the stock of companies that in many cases pay no dividends.

The amount of money involved is causing jitters up and down the gulf.

"I think this is very serious," said one Saudi bank manager in Manama, Bahrain, where many of these "gulf share" companies are registered. "When it comes to that amount of money, I'm not sure the Kuwaiti government can bail the market it out."

Some market analysts say this assumption that the Kuwaiti government will act against a monumental crash has helped fuel the speculation.

In 1977, when prices slumped about 40 percent, the Kuwaiti government stepped in and bought shares--at the average price over a three-month period--to stabilize the market. In that manner, the companies survived, at considerable government expense.

"It's like a national gambling casino and everyone is betting that the house, which is the government here, will be the big loser," said one Western economist.

Other analysts are not so sure the Kuwaiti government is willing to play the game way it did in the 1977 crash. For one thing, none of the companies this time is technically Kuwaiti, although close followers of the market say 90 percent or more of the shareholders are Kuwaiti nationals.

Also, the Kuwaiti government, although it has up to $70 billion in foreign reserves, has less cash on hand than in 1977 because of a sharp drop in oil earnings due to the world glut.

Altogether, the betting seems to be about even as to whether or not the government will step in again, making speculation all the more interesting to Kuwaiti stock gamblers.

The government remains mum on its intentions. Analysts say it could quickly rein in the wild speculation by declaring post-dated checks illegal. But most agree it faces a real dilemma, for those who stand to lose a fortune include the largest banks, members of the ruling Sabah family, sheiks and tycoons of considerable political clout, plus a lot of ordinary Kuwaitis. In short, the lobby in favor of the parallel market staying afloat is enormous.

Souk Manakh, which has been functioning less than a year, is a consequence of liquidity in the private sector that the the latest Central Bank report put at $13 billion.

The wealthy are the main players but the stock fever has also infected relatively poor Kuwaitis and many of the 3,500 Palestinians living here. Since only Kuwaiti or other gulf state Arabs can participate, Palestinians and other foreigners use front men to invest their savings, according to Palestinians involved in the market. It is rumored that some Western investors are following suit.

Stories of ordinary Kuwaitis who have struck it rich on the Souk Manakh are widespread. A Western resident was told while visiting a Kuwaiti family recently that the servant pouring tea for them had just make $18 million playing the market.

The access of low-income Kuwaitis to the parallel market results from the low average cost of a single share, normally less than one dinar, while on the regular market the prices from from four dinars for industrials to 20 for insurance companies.

The Souk is located in the small central square of a new shopping center near the commercial banks. It was supposed to house small shops and stores on the first two floors. Instead, stock brokers, often in the guise of real estate agents, took over the premises. The latest "shop" up for sale went for $31 million, more than twice the original cost of the entire building, according to Kuwaiti and Western sources.

The local newspapers now list 33 "open" companies and 12 "closed" ones on the market, but an official of the smaller government-regulated stock exchange said he thought there were now over 60 firms and more being created every day.

The legal stock exchange is across the street. On the other side stand two large unfinished buildings, one the site for a new exchange and the other a mosque.

Kuwait's regular stock exchange lists 41 locally registered companies and two approved gulf-shares ones. With $6.8 billion worth of dealings on 256 million shares last year, the legal market ranks from being the fourth to the eighth largest in the world, depending on the day's volume.

On the regular market, the average value of all shares increased by 52 percent last year. But this is modest compared to Souk Manakh, where the average value of shares is estimated by market watchers to have jumped between 100 and 200 percent in the past 12 months.

One notable difference between the legal and parallel stock markets is that while the former has a ticker showing a fixed single value for a company's shares, the latter has none. In fact, each broker on the parallel market sets his own price for the gulf shares.

The Souk Manakh can be very Arab in its functioning. Investors pay no attention to companies' price-earnings ratios, profits, investment plans or even the size of dividends. They place their faith in the names of those associated with the company, and sometimes a firm will carry a well-known Kuwaiti family name just to attract buyers.

Public demand for shares far in excess of what is available and rumors about a company's future, planted skillfully in the local press, are viewed by outside observers as the main factors controling the ups and downs in the market. But mostly it has been ups.

"Rationally, you say it is an unreasonable phenomenon," remarked the Saudi banker in Manana. "But this is beyond all reason. Those who have been irrational have made a fortune out of it."