Kuwait — The elderly man groped his way forward. Waving a 150,000 Kuwaiti dinar [$532, 500] check he asked assistance in finding the Souk al Manakh - the ''weather market'' in the heart of Kuwait City's business district.
Little did this Bedouin understand the intricate mechanics of a stock market. But fortified with tales of fortunes quadrupled and even quintupled, Kuwait's stock market craze had finally gripped him.
Both Kuwait's legal stock market and, the Souk al Manakh, the burgeoning extra-legal Gulf securities exchange, have had remarkable performances. However, the Souk al Manakh is ''unique,'' or so say government officials and market participants. Most stock market experts would probably characterize the exchange as ''heretical.''
Securities of 54 real and fictitious predominantly Kuwaiti-owned offshore companies are traded on the Souk al Manakh with no relation to company performance or prospects. Trading on this market has nevertheless come to dominate the lives of Kuwaitis in search of a domestic outlet for their money. No discussion can avoid the tall-sounding tales of huge profits being made by Kuwaitis of all walks of life.
''This is a country with limited resources,'' explains Kuwaiti Finance Minister Abdullatif al Hamad, who is generally credited for Kuwait's sophisticated approach to most financial dealings. ''We have no industrial or agricultural development. Real estate is limited - there is just that much land. Yet the reserves accrued to the private sector and the general public are of a phenemonal magnitude,'' he says in reference to the past oil bonanza.
Most analysts say significant trading on the somewhat obscure Gulf securities market began last summer. (There are no trustworthy statistics.) The increase in trading coincided with the drifting back into Kuwait of large capital flows following the drop in interest rates in the United States and elsewhere. At the same time the government hoped to offer an outlet for this surplus capital by allowing the formation of close (nonpublic) corporations, which could go public after fulfilling certain requirements.
But the surplus capital quickly found its way to the Souk al Manakh, where among others, shares of close corporations are actively traded. Profits at the Souk al Manakh soon began to dwarf opportunities available at Kuwait's legal stock exchange, where shares increased in value during 1981 by an average 63 percent.
Rumor and the entertainment value seem to be important pillars of the Souk al Manakh. Companies that have yet to produce a balance sheet and whose assets are reported not to exceed rental of a post office box are hot merchandise. Rumor that a chicken farm in Sharjah was about to really acquire chickens sent its stock skyrocketing. Even before that run-up, the company had highly valued stock.
Said one banker: ''Given the price of the company stock, these are going to be the most expensive chickens in the world.''
While this company, like many others on the Souk al Manakh, reports a zero price-earnings ratio, bona fide companies on the legal Kuwait stock market claim price-earnings ratios in the hundreds and sometimesabove a thousand.
The booming share business has hiked both commodity and real-estate prices. A tiny broker's stall at the Souk went for 9 million Kuwaiti dinars [$32 million].
Added to all this is the fact that much of the dealings are done with Fhecks postdated anywhere from six months to three years. Estimates of the total volume of these checks are by pure speculation but a figure of 8 billion Kuwaiti dinars ($28 billion) is often heard in government circles.
Most Kuwaitis evaluate the stock markets as ''the best thihg that happened to us.'' Says the deputy chairman of the Commercial Bank of Kuwait, Feisal Yousef al Marzouk: ''It helped spread the wealth outside the traditional families. Lots of people improved their standard of living through speculation on the stock market.''
Critics argue that this is fine until the crash occurs. ''It's pure gambling'' says one analyst. ''You ride with the high rollers. . . .But you are in trouble if you cast your dice where the big men have already pulled out.''
The Kuwait financial community remains nevertheless divided on whether or not the Gulf securities market will crash. Traditional economists say the crash is inevitable and raise the argument that the postdated checks prevent the flattening out of the market. But, says one Western expert, ''the Gulf shares market is a unique Kuwaiti institution, perhaps so unique that Kuwait knows how to keep it going.'' While most observers are waiting for the first check to bounce, others insist that strict codes in traditional Kuwaiti society may not allow this to happen.
No more of a consensus exists in the debate on the possible effects of a crash on the rest of the Kuwaiti economy. ''We will all be hurt. It's unavoidable'' says a prominent Kuwaiti banker. Government officials predict a ''technical crash rather than a depression'' because money is not being drained out of the market. Economists say the real problems will arise once a collapse wipes out the domestic outlet for dinars. Dinar holdings will be converted back into dollars - which could force the government to dip into its estimated $70 billion reserves.
Government officials warn that unlike five years ago, this time they will not bail out the market. ''Why should we bail out people who sell air to each other?'' asks Finance Minister al Hamad.
Kuwaitis nevertheless are confident enough to stay in the game and bet against the house, which they see as the government. Many are convinced that the government cannot afford the social implications of a crash.
Possibly the greatest damage caused by Kuwait's unique stock market is the effect on the work morale of the indigenous population. Says a foreign diplomat: ''The work ethic here has always been warped. But now Kuwaitis are doing less than ever. Why bother about a job if you can get something by doing nothing?'' A concerned social scientist throws his hands in the air searching desperately for answers: ''How does one educate a generation which owns everything and can only discuss money? What do you do with a country where talented teachers and doctors find that two weeks of gambling on the stock market earns more than a year of honest constructive labor?''