Talk about unintended consequences. Qatar's banks announced a cash injection from the Qatar Investment Authority (QIA) this week worth 5.5 billion rials.
The QIA is using the funds to subscribe to upcoming share issuances and to ease the strain on the small country's lenders as they finance the 2022 FIFA World Cup. On Wednesday, bank stocks plummeted.
But the market's pessimism seems to be overdone. For proof, just look at Commercial Bank of Qatar (CBQ), which rose 5.9 per cent yesterday, its biggest leap in five weeks, after Shuaa Capital raised its stock price estimate by 18 per cent to 114.3 rials.
"Strong sector figures were disclosed at the end of December, with stronger-than-expected sector growth forecast," said Sofia el Boury, a financial analyst at Shuaa Capital.
Could its upward trend continue? The bank reports earnings on Sunday, with analysts expecting net profit of 456m rials, according to consensus estimates on Bloomberg. Shuaa raised the bank's price estimate after the announcement of the QIA's infusion and new bond issuances from Qatar's central bank worth 50bn rials, intended to mop up excess liquidity in the banking system.
CBQ, Qatar's second-biggest lender, received a boost of 1.61bn rials, taking the QIA's stake to 16.7 per cent, according to Qatar's official news agency.
Moody's Investors Service said the QIA's cash injection was a credit positive for the sector.
"The fresh equity injected by the government's investment arm will strengthen bank capitalisation and also enable banks to fund higher loan growth in anticipation of the 2022 World Cup," Moody's said in a report.
So why the long faces among investors? Caveats remain, with share dilution a distinct worry - and the threat of further rights issuances to come.
Qatar's government is sparing no expense in developing the country for the World Cup. Further liquidity injections via share purchases are a distinct possibility, given the small size of the sector and the estimated up to US$100bn needed to prepare for 2022.
Qatar's banks may be leading their peers in Saudi Arabia and the UAE in growth of loans and deposits, according to Credit Suisse. But a country of only 1.4 million people does not need many bank accounts. Further strain on the sector remains a possibility.