Qatar's benchmark stock market <.QSI> has fallen 11.5 percent since early June when Saudi Arabia, United Arab Emirates (UAE), Bahrain and Egypt broke off relations and transport ties with Qatar, alleging it finances terrorism, something Doha vehemently denies.

The embargo also jolted Qatar's currency and pushed up yields on Qatar's sovereign dollar bonds, which have partly recovered.

"We noticed specific institutions in those three countries trying to dump shares," said Rashid Ali al-Mansoori told Reuters.

"It was intentional from those institutions to damage the market. They wanted to affect the market." He declined to name the institutions.

Al-Mansoori's statement came after banking sources told Reuters last week that financing for Qatari banks had dried up from the United Arab Emirates, Bahrain and Saudi Arabia amid the diplomatic spat.

As a result the proportion of institutional investors in the Qatari market from countries of the Gulf Cooperation Council (GCC), had declined since the crisis, he said, but added there was no change in the proportion of GCC retail investors.

Qatar's stock market is the third biggest in the Gulf after Saudi Arabia and markets in the United Arab Emirates.

Al-Mansoori did not provide a breakdown of the proportion of investors from other GCC states. Non-Qatari GCC investors generally account for a small portion of investors in the market. For example, GCC individual investors account for around 0.25 percent of the total ownership of shares in Qatar National Bank (>> Qatar National Bank SAQ), the largest lender, according to QSE data.

Al-Mansoori also said some of the initial selling in the stock market was because some investors wanted to make money from the situation by selling off at a high level.

"We still see wealthy GCC individuals from those three countries active in the market. The market was still open to them," Al-Mansoori said.

Despite the market turmoil, Al-Mansoori said QSE could see more listings in the coming months following Investment Holding Group's plans to float 60 percent of its shares on the exchange.

"There are other companies in the pipeline including a family-owned industrial company for an IPO," he said.

"In the third quarter we will see some IPOs."

The exchange is also in the process of launching a gold exchange traded fund, while two other ETFs have been approved for Doha Bank (>> Doha Bank (Q.S.C)) and Masraf Al Rayan (>> Masraf Al Rayan (Q.S.C.)).

"Yes the border is closed but this blockade doesn't affect our business, our economy and day to day living. It only affects our freedom," he said.

(Writing by Saeed Azhar; Editing by Susan Fenton)

By Tom Finn and Tom Arnold