MANILA, Philippines -- Shares were trading lower halfway through Tuesday's session, weighed down by mounting worries about the health of US financial markets and on caution ahead of the local central bank's interest rate-setting meeting on Thursday.
At 0227 GMT, the 30-company composite index dropped 28.72 points or 1.2 percent to 2,428.55.
The broader all-share index lost 13.75 points or 0.9 percent at 1,537.90.
The Dow Jones industrials lost 0.4 percent Monday and closed at its lowest point since July 21, 2006 at 11,055.19 as investors worried more banks would follow the lead of failed mortgage lender IndyMac, which was taken over by government last Friday.
Earlier, the Federal Reserve said it would extend emergency funds to Fannie Mae and Freddie Mac if needed. These mortgage lenders together hold or back $5.3 trillion of mortgage debt, about half the outstanding mortgages in the United States.
"The Fed's bailout plan for troubled lenders is a short-term solution that tends to create long-term problems," said Jose Vistan Jr., research director at AB Capital Securities.
"This will only make the dollar weaker and commodities stronger. It's inflationary."
On Monday, the dollar was mixed against other major currencies, while gold prices jumped.
Light, sweet crude settled up 10 cents at $145.18 a barrel on the New York Mercantile Exchange.
Local investors also stayed passive ahead of Thursday's central bank meeting which is widely expected to raise interest rates to curb inflation.
Domestic inflation hit a 14-year high of 11.4 percent in June and is expected to accelerate further within the third quarter.
The central bank raised the key rates by 25 basis points early last month for the first time in nearly three years as soaring inflation reflected the second-round effects of higher food and energy prices. The government last week approved public transport fare increases.
"The market has already discounted the central bank's likely move to bring up rates by 25 basis points. But a higher figure could really drain the equities market," said Astro del Castillo, managing director of First Grade Holdings.
Index leader Philippine Long Distance Telephone Co. shed 2.2 percent to P2,420.00.
Rate-sensitive property stocks fell on concerns higher interest rates would dampen demand for residential housing projects.
Megaworld Corp., the country's second-largest property developer, dropped 3.3 percent to P1.18.
Filinvest Land Inc. fell 2.7 percent to 73 centavos while Robinsons Land Inc. slipped 1.5 percent to P6.60.
Among banks, top-ranked Metropolitan Bank and Trust Co. edged down 1.5 percent to P33.00.
($1 = P45.15)
