70% Fixed Income — 30% Equity

We maintained a balanced portfolio positioning in May as domestic markets navigated elevated inflation concerns, persistent geopolitical risks, and increasing expectations of further monetary tightening. Local asset allocation remains unchanged at 52.5% Fixed Income and 47.5% Equities.

For Fixed Income, local yields moved significantly higher during the month as investors reacted to elevated inflation, Peso weakness, and uncertainty surrounding the US-Iran conflict. Yields rose by an average of 58 bps month-on-month across the curve. Market sentiment turned cautious following the release of the April inflation print of 7.2% during the first week of May, which reinforced expectations of further BSP policy tightening. Auction results reflected the risk-off environment, with weak demand for longer-dated government securities. Portfolio positioning remains underweight duration versus benchmark, maintaining a preference for shorter-dated securities to manage volatility and preserve flexibility amid an uncertain interest rate environment.

For Equities, we maintain a neutral stance as market sentiment remains challenged by weak economic growth, rising inflation expectations, foreign selling, and geopolitical uncertainty. The market extended its decline during the month, weighed down by softer corporate earnings and MSCI rebalancing-related outflows. Portfolio positioning remains defensive, with a preference for dividend-paying and resilient sectors while maintaining offshore exposure through Fund-of-Funds investments. We continue to monitor macroeconomic developments, earnings trends, and market valuations for opportunities to selectively increase risk exposure as conditions stabilize.