Glaxo, Reckitt Submit Only Bids for Pfizer’s Consumer Unit

GlaxoSmithKline Plc and Reckitt Benckiser Group Plc are the only companies to have submitted non-binding bids for Pfizer Inc.’s consumer business after rival candidates walked away, according to people familiar with the matter.

Pfizer plans to open a data room for Glaxo and Reckitt to start due diligence on the assets before submitting final offers in the next few weeks, the people said, asking not to be identified because the matter is private. French drugmaker Sanofi, Switzerland’s Nestle SA and health care giant Johnson & Johnson were among companies to consider and then decide against bidding for the business, the people said.

The deadline for non-binding offers for the business, which makes well-known brands including the pain reliever Advil, ChapStick lip balm and the dietary supplement Centrum, was Feb. 1, the people said. The unit could fetch $15 billion to $20 billion, people familiar with the matter have said. Potential buyers have expressed concerns about stagnant sales at the division as well as the challenge from online competitors such as Inc, the people said.

Representatives for Glaxo and Reckitt declined to comment. A Sanofi spokesman also said he had no comment. A spokeswoman for Nestle wasn’t immediately available to comment. A spokesman for J&J confirmed that the company had withdrawn from the bidding process and declined to comment further.

A spokeswoman for Pfizer said the company is continuing to evaluate a range of options for its consumer healthcare business, including a full or partial separation from Pfizer through a spin-off, sale or other transaction, and it may still opt to keep the business. The company expects to reach a decision in 2018, she said.

Pfizer first announced a review of the business in October. A sale would help the U.S. drug giant raise billions of dollars in cash for acquisitions and streamline operations to focus on other growth areas.

Sales at the consumer-products business were little changed in the fourth quarter from a year earlier at $950 million. Full-year sales at the unit advanced by 2 percent to $3.47 billion.

Glaxo Chief Executive Officer Emma Walmsley said at a conference in San Francisco last month that the company’s top priority is the pharmaceutical business and that it doesn’t need the Pfizer assets though the unit would be complementary.

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    Trump Stretches Meaning of Deregulation in Touting Achievements

    One is a federal rule, initiated by former President Barack Obama, that removed Yellowstone’s grizzlies from the list of endangered species. Another repealed a grant program that hasn’t been funded since 2011.

    They are among the 67 so-called "deregulatory" actions President Donald Trump cited at a Dec. 14 event to tout "the most far-reaching regulatory reform in history” designed to unburden the U.S. economy from the shackles of government oversight. To illustrate the point, he cut a length of "red tape" attached to a mountain of paper.

    While the president has succeeded in undoing some major environmental and financial industry rules, a Bloomberg News review of the administration’s list found almost a third of them actually were begun under earlier presidents. Others strain the definition of lessening the burden of regulation or were relatively inconsequential, the kind of actions government implements routinely.

    "They are really undercutting their own credibility by putting out numbers that are not, quite frankly, very believable," said Cary Coglianese, a University of Pennsylvania law professor who is also director of the Penn Program on Regulation. “If I were advising them, I would have said put out something that’s credible."

    Read more: Regulation-Killing Push Falls Short of White House Boasts

    An earlier Bloomberg review of Trump administration claims about regulatory actions found that it had taken credit for killing or delaying rules that were pending and hadn’t gone into effect, including more than 100 that were already dead under Obama.

    There have been victories for the administration’s anti-regulatory push — such as Congress’s repeal of 15 regulations and the Federal Communications Commission’s vote this month to curb open-internet rules — but in most cases it has merely delayed implementing rules it opposes or begun the lengthy process of killing them. That means that, so far at least, many of the actions could easily be overturned by a successor.

    In one of his first actions as president, Trump ordered that two regulations be revised or eliminated before any new federal rule could be adopted. In order to follow the order, the White House’s Office of Information and Regulatory Affairs created a new label for rules or agency policy shifts it deemed were lowering burdens on society, calling them deregulatory.

    In the Dec. 14 press conference, Trump said the government had taken 67 such deregulatory actions through Sept. 30 — with an annual savings to society of $570 million — and had imposed just three new regulations. Instead of two for one, the ratio was 22 to one, he said.

    Earlier: Ex-Industry Lobbyists Win Top Jobs in Agencies They Once Fought

    “The never-ending growth of red tape in America has come to a sudden, screeching and beautiful halt,” Trump said at the event.

    The White House didn’t respond to multiple emailed requests for comment on the administration’s list of 67 deregulatory actions.

    While it isn’t nearly as sweeping as he would like, Clyde Wayne Crews, vice president for policy at the Competitive Enterprise Institute, which advocates for limiting the role of government, applauded Trump’s effort. U.S. law requires many steps before a new rule can be imposed or an old one revised, making it difficult for a new administration to take aggressive action so soon, Crews said.

    “In terms of what a president can do on his own, I think this is a good start,” he said.

    Related: Bureaucrats’ Revenge: Government Careerists Thwart Trump Agenda

    The administration is stepping up its efforts to undercut scores of rules that threaten the environment and public safety, says Amit Narang of the advocacy group Public Citizen, which supports regulatory protections.

    However, the claim about taking 67 deregulatory actions doesn’t always add up. 

    For one thing, it’s difficult to assess the White House’s assertion that the deregulatory actions taken through Sept. 30 have lowered the costs to society by a net $570 million a year, or $8.1 billion over time.

    The Office of Management and Budget, the White House arm that oversees regulatory actions, didn’t respond to questions from Bloomberg starting the day after the Dec. 14 announcement on how that figure was calculated. A review of the 67 regulations cited as helping drive down costs found many didn’t include cost-benefit calculations.

    "I’ll give them the benefit of the doubt that $570 million is potentially the cost savings, but they’re not being transparent on how much each action is saving and how it adds up to the $570 million," said Narang, a regulatory policy advocate at Public Citizen.

    Killing Obama’s Rules? Congress Has an Act for That: QuickTake

    The administration’s cost figures also ignore projected benefits for regulations it has blocked, distorting the actual impacts on society, said Denise Grab, a lawyer with the Institute for Policy Integrity at New York University’s School of Law. The institute has sued the Trump administration to block some of its regulatory actions. 

    One action on the list of 67 – it was actually counted twice because two agencies had to act separately — was an immigration rule the administration enacted in July that left two experts scratching their heads over how it could be considered deregulatory.

    The action, by the Department of Homeland Security and the Department of Labor, raised the cap on immigrants entering the U.S. to work in seasonal, non-agricultural jobs by as many as 15,000. The original H-2B visa program had been capped at 66,000.

    "It’s a stretch to call this deregulatory in any way," said Jessica Vaughan, director of policy studies for the non-partisan Center for Immigration Studies in Washington.

    Indeed, instead of lessening the regulatory burden, the regulation imposed additional requirements on businesses that wanted to participate in the expanded visa program, said Vaughan and Laura Reiff, a lawyer at Greenberg Traurig LLP and founder of the Essential Worker Immigration Coalition, which lobbies for immigration reform on behalf of businesses.

    At least 22 of the 67 deregulatory actions — from allowing imports of persimmons from Japan to the adoption of new electric vehicle safety rules — were adapted from efforts begun under Obama, often with little or no change, according to records.

    For example, the list included an Interior Department rule proposed by the Obama administration in June 2016 to allow Alaskan natives to use nonedible parts of migratory birds, like feathers, in handicrafts. It was completed this year, after a minor change.

    Likewise, the rule changing the status of grizzly bears around Yellowstone National Park was also begun under Obama.

    "They have no business taking credit for that," Chris Servheen, who helped craft the regulation before he retired as the Fish and Wildlife Service’s grizzly bear recovery coordinator, said. "It was all started long before the election."

    While the list of 67 actions runs up until Sept. 30, federal records show agencies have continued after that date to label actions as deregulatory even though they are just eliminating outdated or unnecessary proposals.

    For example, the Food and Drug Administration on Oct. 18 killed a proposed rule that would have prohibited the use of cow byproducts in the manufacture of drugs, according to records. The rule, originally proposed in 2007, was designed to protect against the spread of mad-cow disease, but other actions since then have protected cattle from the disease. Eliminating the rule will have no effect on the cattle industry.

    The proposed rule was dropped because it was “scientifically outdated and has been superseded by subsequent public policy,” the FDA said in an emailed statement.

    Under Trump and Administrator Scott Pruitt, the Environmental Protection Agency has taken a number of steps to rescind, delay or undermine environmental regulations issued under the previous administration. The agency put off the carbon-cutting Clean Power Plan and moved to repeal it. It delayed rules on methane leaks from oil and gas equipment, safety requirements on chemical plants and pollution in the water released by coal plants while it moved to rework and ease off on those Obama-era requirements.

    But of the 16 deregulatory actions taken by EPA on the administration’s list of 67, six were proposed under Obama and completed without major changes. It also included small actions that are typical under any administration and a few technical measures altering the paperwork that industry must complete to comply with EPA rules.

    For example, the list includes an EPA delay of a rule requiring makers of nanoscale compounds, microscopic particles increasingly used in drugs and electronic components, to disclose the known health effects of their products. The delay was just for three months, however, from May 12 to Aug. 14. When the requirements went into effect in August, the environmental group Natural Resources Defense Council praised them as a rare example of "some good news" from the EPA.

    In another case, Obama’s EPA in 2015 agreed to reconsider monitoring measures for phosphoric acid and phosphate fertilizer that had been set as part of a broader rule in 2014. The EPA proposed the industry-related changes last December, and Pruitt’s EPA ratified and finalized those standards in September.

    One action on the administration’s list scrapped a grant program providing federal funds to help pay for construction of public TV and radio stations. In 2010, the Obama administration ruled that money was available from other sources and ended the program. Congress followed suit and hasn’t funded the program since.

    “This is a nonsensical rule to include,” the University of Pennsylvania’s Coglianese said. “There’s no benefit to business getting rid of this rule. This is meaningless to have on this list.”

      Read more:

      Even a 1% Pay Raise Would Be a Lot for Japanese Workers in 2018

      Japanese workers will see a 1 percent increase in their total earnings next year, the most since 1997, as rising profits and the tightest labor market in decades add upward pressure on pay, a Bloomberg survey shows.

      “The labor shortage is definitely getting more serious,” said Shuji Tonouchi, a senior market economist at Mitsubishi UFJ Morgan Stanley Securities Co. who was among 16 respondents to the Dec. 8-13 poll. “On top of the tight labor market, improving corporate earnings will add tailwinds.”

      The responses from Tonouchi and others are cause for optimism about pay gains after five years of aggressive monetary and fiscal stimulus. But they cautioned that the increase in total earnings, which includes regular wages, overtime and bonuses, may not translate directly into consumption.

      Looking Up

      Japanese workers may get their biggest pay increase in two decades.

      Note: 2017 figures are averages through October from labor ministry data. 2018 figures are average forecasts from Bloomberg's survey of economists.

      Click here to see a dashboard of Japan’s labor-market indicators.

      While tepid increases in wages have been a global problem in recent years, the issue is particularly acute for Japan, which is grinding its way back to economic health after a prolonged period of deflationary malaise. The lag between part-time and full-time pay is also an ongoing concern for Japan.

      Getting more money into the pockets of workers is vital for Prime Minister Shinzo Abe’s strategy to reflate the economy and he’s urging companies to boost pay by 3 percent in 2018. Bank of Japan Governor Haruhiko Kuroda said last week he hoped that companies and labor unions would take "forward-looking initiatives" next year.

      After previous calls were largely ignored, the Abe government is now backing up its talk with a carrot-and-stick approach by providing tax benefits to companies that increase spending on wages and investment while clamping down on benefits for firms that don’t.

      Decoding pay statistics: Individual gauges and the big picture.

      One of the most important early measures of progress in 2018 will be the "shunto" spring wage talks between unions and companies, which can set the tone for pay rises across the economy.

      The Japanese Trade Union Confederation, known as Rengo, said it is seeking a 4 percent increase for its members.

      If history is any guide, companies will push back hard against this and agreements will be struck for a much smaller increase.

      Rengo is likely to report the first round of results in mid-March.

        Read more:

        Everything You Need to Know About the GOP Tax Bill

        Here are key changes to U.S. tax law for individuals and businesses that have emerged from the final Republican bill that’s headed for votes in the House and Senate next week.

        Individual Tax Rates

        (Note: Individual rate cuts would expire after 2025.)

        Current law:

        • Seven rates, starting at 10 percent and reaching 39.6 percent for incomes above $418,401 for singles and $470,701 for married, joint filers.


        • Seven rates, starting at 10 percent and reaching 37 percent for incomes above $500,000 for singles and $600,000 for married, joint filers.
          For joint filers:
          • 10 percent: $0 to $19,050
          • 12 percent: $19,050 to $77,400
          • 22 percent: $77,400 to $165,000
          • 24 percent: $165,000 to $315,000
          • 32 percent: $315,000 to $400,000
          • 35 percent: $400,000 to $600,000
          • 37 percent: $600,000 and above

          For single filers:

          • 10 percent: $0 to $9,525
          • 12 percent: $9,525 to $38,700
          • 22 percent: $38,700 to $82,500
          • 24 percent: $82,500 to $157,500
          • 32 percent: $157,500 to $200,000
          • 35 percent: $200,000 to $500,000
          • 37 percent: $500,000 and above

        Corporate Tax Rate

        Current law: 35 percent

        Proposed: 21 percent, beginning in 2018.

        Corporate Alternative Minimum Tax

        Current law: Applies a 20 percent rate as part of a parallel tax system that limits tax benefits to prevent large-scale tax avoidance. Companies must calculate their ordinary tax and AMT tax, and pay whichever is higher.

        Proposed: Repealed.

        Individual Alternative Minimum Tax

        Current law: Individual AMT can apply after exemption level of $54,300 for singles and $84,500 for married, joint filers, and the exemptions phase out at higher incomes.

        Proposed: Increase the exemption to $70,300 for singles and $109,400 for joint filers. Increase the phase-out threshold to $500,000 for singles and $1 million for joint filers. The higher limits would expire on Jan. 1, 2026.

        Expensing Equipment

        Current law: Businesses must take depreciation, spreading the recognition of their equipment costs for tax purposes over several years.

        Proposed: Businesses could fully and immediately deduct the cost of certain equipment purchased after Sept. 27, 2017 and before Jan. 1, 2023. After that, the percentage of cost that could be immediately deducted would gradually phase down.


        Current law: The U.S. taxes multinationals on their global earnings at the corporate rate of 35 percent, but allows them to defer taxes on those foreign earnings until they bring them back to the U.S., or “repatriate” them.

        Proposed: U.S. companies’ overseas income held as cash would be subject to a 15.5 percent rate, while non-cash holdings would face an 8 percent rate.

        Pass-Through Deduction

        Current law: Pass-through businesses, which include partnerships, limited liability companies, S corporations and sole proprietorships, pass their income to their owners, who pay tax at their individual rates.

        Proposed: Owners could apply a 20 percent deduction to their business income, subject to limits that would begin at $315,000 for married couples (or half that for single taxpayers).

        Obamacare Individual Mandate

        Current law: An individual who fails to buy health insurance must pay penalties of $695 (higher for families) or 2.5 percent of their household income — whichever is higher, but capped at the national average cost of the most basic, low-premium, high-deductible plan.

        Proposed: Repeal the penalties.

        Standard Deduction and Personal Exemptions

        Current law: $6,350 standard deduction for single taxpayers and $12,700 for married couples, filing jointly. Personal exemptions of $4,050 allowed for each family member.

        Proposed: $12,000 standard deduction for single taxpayers and $24,000 for married couples, filing jointly. Personal exemptions repealed.

        Individual State and Local Tax Deductions

        Current law: Individuals can deduct the state and local taxes they pay, but the value is subject to certain limits for high earners.

        Proposed: Individuals can deduct no more than $10,000 worth of the deductions, which could include a combination of property taxes and either sales or income taxes.

        Mortgage Interest Deduction

        Current law: Deductible mortgage interest is capped at loans of $1 million.

        Proposed: Deductible mortgage interest for new purchases of first or second homes would be capped at loans of $750,000 starting on Jan. 1, 2018.

        Medical Expense Deduction

        Current law: Qualified medical expenses that exceed 10 percent of the taxpayer’s adjusted gross income are deductible.

        Proposed: Reduce the threshold to 7.5 percent of AGI for 2017 and 2018.

        Child Tax Credit

        Current law: A $1,000 credit for each child under 17. The credit begins phasing out for couples earning more than $110,000. The credit is at least partially refundable to qualified taxpayers who earned more than $3,000.

        Proposed: Double the credit to $2,000 and provide it for each child under 18 through 2024. Raise the phase-out amount to $500,000, and cap the refundable portion at $1,400 in 2018.

        Estate Tax

        Current law: Applies a 40 percent levy on estates worth more than $5.49 million for individuals and $10.98 million for couples.

        Proposed: Double the thresholds so the levy applies to fewer estates. The higher thresholds would sunset in 2026.

          Read more:

          A Manager of $42 Billion Fears Bubble in World’s Biggest Stocks

          The world’s biggest companies could be hiding the biggest risks.

          That’s because companies such as Inc. and Alibaba Group Holding Ltd are overvalued, according to Robert Naess, who manages about $42 billion in stocks at Nordea Bank AB, Scandinavia’s largest bank.

          “I’m a bit worried about the valuation of these very popular companies,” Naess, portfolio manager, said in an interview in Oslo on Friday. “The big stocks have become more expensive. There’s danger of a bubble in them.”

          Naess and his partner, Claus Vorm, quantitatively analyze thousands of companies, investing in those with the most stable earnings and avoiding expensive stocks, a strategy which has delivered a 10 percent return for the Global Stable Equity Fund this year. It has returned 12 percent on average in the past five years, beating 75 percent of its peers.

          They prefer “boring” stocks, unlike the global behemoth technology companies that have led the global stock rally. Tech stocks sold off at the end of November, with the single worst day on record for the so-called FANG stocks. One of those stocks, Amazon, which has risen 55 percent this year, has a price-to-earnings ratio of 275 for 2017, compared with 18.2 on average for MSCI World Index.

          “Long-term, 5-10 years, stocks that are expensively priced, such as Amazon, Tencent and Alibaba, will give a low return,” Naess, who also shuns Facebook, Inc., said. “I’m pretty certain that in the next 10 years the return on those will be lower than the market.”

          The fund holds Apple Inc. and Alphabet Inc., which are “reasonably priced”. It has also bought a stake in Merck & Co., Inc. and increased in Amgen Inc., CVS Health Corporation and Walgreens Boots Alliance, Inc.

          Naess sees about 12 percent upside for the global developed stock market in the next 12 months provided companies continue to deliver expected earnings growth.

          “2018 looks OK,” he said. “Normally, I think the earnings estimates are too high. But I believe earnings estimate could be too low next year given earnings are so good this year.”

            Read more:

            Move Over Tech. Here Come Southeast Asias Builders

            Tech is so 2017.

            With at least $323 billion in infrastructure spending in the pipeline in Southeast Asia and potentially more expected over the next few years, 2018 could well shape up as the year of builders’ stocks from Indonesia to the Philippines that have been the laggards in a broader market rally this year.

            Governments are boosting spending on everything from airports to high-speed rails and ports to increase connectivity and boost economic growth in what promises to be a boon for the region’s construction companies. In one of the more ambitious programs in the region, Philippine President Rodrigo Duterte has earmarked an unprecedented $180 billion for infrastructure to keep driving one of the world’s best-performing economies over coming years. Malaysia and Thailand are also ramping up allocations to public works ahead of general elections in 2018.

            “Infrastructure has been under invested whether it’s clear water, clean air, energy, roads, ports, railways, education, health care — so there are tons of opportunities,” said Ashish Goyal, head of emerging markets equities at NN Investment Partners (S) Ltd., which manages $288 billion in assets. The firm owns stakes in Indonesian construction stocks, he said, adding that investors should watch for the pace of execution in the various countries.

            UBS Group AG expects “changes in government policy and delivery on infrastructure” to be among the region’s biggest themes for 2018 as growth in global trade fades, analysts including Ian Gisbourne wrote in a report dated Nov. 28.

            Construction stocks on the MSCI Asean Index have risen an average of about 7.4 percent this year in dollar terms, about one-third the gain of the overall gauge, which is set for its best performance in seven years. Technology shares have provided the biggest boost to the Southeast Asian index this year as global demand for electronics returned.

            Some builders are already rallying in anticipation of the rewards they will reap from the spike in infrastructure outlays. Indonesian cement supplier PT Indocement Tunggal Prakarsa soared as much as 54 percent earlier this year as investors expect it to benefit from a surge in demand as the nation builds toll roads, ports and power plants. Manila-based EEI Corp. has surged 73 percent, leading a rally in Philippine construction stocks, as it begins work on the nation’s $1.6 billion, 44 kilometer (27 mile) mass-railway project.

            Companies that provide services for construction projects, such as improving management efficiency or sustainability, may also capitalize on the spending boom on public works, Felix Lam, a portfolio manager at BNP Paribas SA’s asset management arm, said by phone.

            Even so, the Southeast Asian market as a whole might continue to underperform, compared to “its larger, more liquid and faster growing North Asia and India counterparts,” Goldman Sachs Group Inc. analysts including Timothy Moe wrote in a November report. And Credit Suisse Group AG has maintained its underweight rating on the region for 2018.

            Still, Morgan Stanley sees investor attention back on the Asean region as markets are expected to give returns of as much as 10 percent next year, more than three times what’s seen for emerging markets.

            Here is a breakdown of what countries are planning and what investors are saying about Southeast Asia’s infrastructure spending spree:


            • The government has allocated about 1 trillion pesos ($20 billion) to infrastructure in the 2018 budget as part of Duterte’s $180 billion infrastructure program over a six-year period to build a network of railroads and highways across the archipelago
            • Tax reform will help fund infrastructure projects; construction and infrastructure-related stocks to outperform in 2018, according to Noel Reyes, who helps manage $1 billion as chief investment officer at Security Bank Corp.
            • Tax reform bill awaiting Congress approval and is among first of five tax packages proposed by Duterte to raise taxes to pay for infrastructure projects
            • Infrastructure program includes 70 projects from railways, airports, roads and bridges, cities, ports to mass transit during Duterte’s six-year term as president
            • Companies involved in construction and infrastructure: Metro Pacific Investments Corp., Megawide Construction Corp., Ayala Corp., EEI Corp.


            • Indonesia’s Finance Minister Sri Mulyani Indrawati has announced more than 240 infrastructure projects
            • Country needs 931 trillion rupiah ($69 billion) from 2015 to 2019 for infrastructure spending; has allocated only 528 trillion rupiah over the period, according to Public Works and Public Housing Ministry
            • Concerns about funding availability and financing risks among Indonesian infrastructure companies have depressed construction stocks this year
            • Shares of PT Waskita Karya, the country’s biggest listed builder, have dropped 27 percent in 2017 even as the Jakarta Composite Index hit a record high in November
            • Biggest construction companies: PT Jasa Marga, PT PP Persero, PT Waskita Beton


            • Malaysia has allocated 210 billion ringgit ($51.6 billion) for projects in the 2018 budget of which 73 percent will go rail and public transport
              • About 55 billion ringgit allocated to East Coast Rail Link, 50 billion-60 billion ringgit given to Kuala Lumpur-Singapore High Speed Rail and 40 billion ringgit to phase 3 of the mass rapid transit system
            • Rail, affordable housing, roads and water infrastructure are major segments that will benefit from government’s spending next year, Sharizan Rosely, an analyst at CIMB wrote in a report dated Oct. 30
            • General election due by August 2018
            • Biggest construction companies: Gamuda Bhd., IJM Corp. Bhd., Sunway Construction Group Bhd., Malaysian Resources Corp. Bhd.


            • Government has pledged 1.5 trillion baht ($46 billion) over the next five years to boost growth via infrastructure spending to develop its three eastern provinces as the Eastern Economic Corridor
            • Infrastructure spending to remain key driver for the economy and new development projects such as EEC, said Orsen Karnburisudthi, Bangkok-based senior investment manager at Aberdeen Asset Management Co.
            • EEC envisions to turn the provinces into hubs for technological manufacturing and services with strong connectivity by land, sea and air with help of state and private funding as well as foreign direct investment
            • Elections to be key upside for economic growth and business sentiment, Aberdeen said; Prime Minister Prayuth Chan-Ocha said in October a vote will be held in November 2018
            • Banks to see earnings improve as economic growth boosts loan growth and reduces bad loan provisions, while shopping mall operators and retailers can benefit from consumption recovery, Orsen said
            • Biggest construction players: Italian-Thai Development Pcl, CH. Karnchang Pcl, Unique Engineering & Construction Pcl, Sino-Thai Engineering & Construction Pcl; EEC beneficiaries: Amata Corp. and WHA Corp.


            • Vietnam has allocated 150 trillion dong ($6.6 billion) for infrastructure development in 2016 to 2020 and still needs $480 billion to fund investments by 2020, according to the Ministry of Planning and Investment
            • Key infrastructure projects include a $13 billion, 1,800 kilometer expressway from Ha Noi in the north to Ho Chi Minh city in the south, the nation’s largest ever road project
            • Biggest infrastructure players: Songda Urban, Ho Chi Minh City Infrastructure, Coteccons Construction, Ha Do JSC, Song Da No. 9 JSC


            • As the only developed market in Southeast Asia, Singapore is less likely to see government expenditure in infrastructure on the same scale as its neighbors
            • While some key projects for 2018 include a new airport terminal at Changi Airport, mega shipping port and the KL-Singapore high-speed rail, the country’s stock market is more likely to benefit from a recovery in the property sector and overall economy
            • DBS Group Holdings Ltd. sees property prices recovering 3 percent to 5 percent annually over the next two years, buoying small to mid-cap construction-related and real estate stocks such as Chip Eng Seng Corp. and APAC Realty Ltd., analysts including Ling Lee Keng wrote in a note dated Dec. 5
            • Singapore’s economic recovery is also seen broadening out from the manufacturing industry in 2018 to the services sector, which accounts for about two-thirds of gross domestic product

              Read more:

              Senate Suspends Bill Votes to Friday Morning: Tax Debate Update

              The Senate tax bill is headed for a marathon debate this week after Republican leaders brought the measure to the floor Wednesday with the goal of holding a final vote by the end of the week. Here are the latest developments, updated throughout the day:

              Senate Republicans Scramble to Salvage Bill (8:51 p.m.)

              Senate Majority Leader Mitch McConnell said votes on the tax bill will resume at 11 a.m. on Friday as the collapse of a key compromise to win a majority for a Senate tax overhaul left Republicans scrambling to salvage the legislation.

              Debate over the bill may continue into the evening, McConnell said. It’s unclear when the unlimited amendment vote series known as “vote-a-rama” would begin.

              After seeming to gain momentum during the day, the GOP’s tax cut plan smacked into a decision from the Senate’s rule-making office that said a so-called trigger proposed by GOP holdouts didn’t pass procedural muster. At least three Republicans — Bob Corker of Tennessee, Jeff Flake of Arizona and James Lankford of Oklahoma — had tied their votes to the mechanism, which would have increased taxes if revenue targets weren’t met. The trio is now demanding that leaders agree to other changes in the bill to avoid a huge deficit increase.

              Republicans have a slim majority in the Senate and can only afford to lose two members if they want to pass the tax bill without Democratic support.

              Adding to the difficulty was a ruling by a key fiscal referee that the tax plan would blow a $1 trillion hole in the nation’s debt — even after accounting for economic growth.

              The day’s events left GOP leaders contemplating a variety of potentially unpalatable measures — including making some tax cuts on the individual and corporate side end within six or seven years. The current version of the Senate bill would sunset individual breaks in 2026.

              It’s a potential nightmare scenario for Republicans, who have been counting on a tax overhaul to be their first major legislative accomplishment of the year. The party is under enormous pressure to complete the tax measure with less than a year to go before the mid-term elections and with wealthy donors and large corporations demanding tax rate cuts.

              Senator Ted Cruz of Texas “absolutely” will fight Corker’s effort to add taxes back to the Senate’s tax bill, he said in a brief interview late Thursday as he left the Senate following a lengthy conversation with Corker on the Senate floor.

              "Fifty-one senators want to cut taxes," Cruz said. "One is trying to raise taxes. That’s not right."

              A subdued Corker said minutes earlier the bill is "still changing."

              “I’m trying to do the best I can to make it a better bill,” Corker said.

              No. 2 Senate Republican John Cornyn said his preference would be not to add additional taxes, "but what I want most is 50 votes," he said.

              Cornyn said Senator Pat Toomey is working with Corker to reach an agreement.

              Senator Ron Johnson of Wisconsin also held out during an hourlong standoff on the Senate floor over a procedural vote that would have sent the measure back to the Senate Finance Committee. Johnson said he wants to ensure he can offer amendments, including one to raise the pass-through deduction to about 25 percent, paid for by eliminating the corporate deduction for state and local taxes.

              Another GOP senator whose support is in question, Susan Collins of Maine, is pushing to preserve the deduction for individual property taxes up to $10,000. That issue could be headed for a resolution. The Senate will ultimately adopt the House Republican proposal allowing the property tax break, according to Senator Mike Rounds of South Dakota, who’s close to Republican leaders.

              Republican Senator Lindsey Graham added: “I think you’re going to see a lot of these scrums, and here’s the way they’ll end: We’ll pass the bill sometime tomorrow.” — Laura Litvan, Erik Wasson, Steven T. Dennis and Sahil Kapur

              Senate Bill Seen Losing $1 Trillion After Growth (5:09 p.m.)

              A new analysis released Thursday by the Joint Committee on Taxation found that the Senate tax bill would generate enough economic growth to lower its $1.4 trillion revenue cost by only about $458 billion over a decade.

              After accounting for interest rates, the growth figure would fall to $407 billion, said the JCT, Congress’s official scorekeeper on tax legislation. That would leave a 10-year revenue loss of roughly $1 trillion.

              The bill’s backers have argued the tax plan would pay for itself through robust economic growth resulting from the cuts — but the new analysis is the latest among several to counter that argument. JCT estimated that the bill would boost gross domestic product by about 0.8 percent on average over the next 10 years.

              Growth estimates are especially important for a trio of senators — Bob Corker of Tennessee, James Lankford of Oklahoma and Jeff Flake of Arizona, who have voiced concerns about tax cuts adding to the deficit. The three support adding a revenue trigger to the bill that would provide for an automatic tax increase if revenue targets weren’t met, and Senate Republicans are wrangling over the issue.

              Discussions have centered around a $350 billion tax-increase trigger, far short of the $1 trillion revenue loss the JCT projects.

              A conservative-leaning policy center, the Washington-based Tax Foundation, released a statement saying JCT’s findings were “likely underestimating the economic growth spurred by this tax bill.”

              “The range of estimates from JCT includes several important assumptions that limit its growth results, particularly, assumptions regarding the Federal Reserve’s response to potential inflation and the United States being a closed economy,” the policy group said in a statement. The group is working on its own score for the latest version of the Senate bill.

              The Senate bill includes a provision that repeals all the individual tax cuts by 2026, which would tend to crimp economic growth. Senate tax writers included the expirations to make the bill comply with Senate rules against budget legislation increasing long-term deficits.

              The new estimate “ends the fantasy about magical growth and claims that tax cuts pay for themselves,” said Senator Ron Wyden, the top Democrat on the tax-writing Senate Finance Committee, who called the finding the “total opposite” of what Republicans have said.

              “It’s hard to see how they’re going to fix this with some kind of trigger,” Wyden said.

              A spokeswoman for the Senate Finance Committee said official findings that the Senate tax bill would reduce federal revenue by about $1 trillion over 10 years — even after accounting for economic growth — “are curious and deserve further scrutiny.”

              It’s unclear when that scrutiny might take place. Senate Republicans have already voted to begin debate on the tax bill, leaving little time for the sort of public consideration that typically takes place in committee hearings.

              Nonetheless, Senate Finance spokeswoman Julia Lawless called the JCT analysis “incomplete” because the Senate bill is “evolving.”

              Senators have so far written more than 70 potential amendments to the provision — though it’s unclear how many of them might be considered. Senate Majority Leader Mitch McConnell has not announced any new timetable for a vote on the actual bill, though he and others have set a goal of passing it by the end of this week. — Sahil Kapur, Erik Wasson and Laura Litvan

              John McCain Says He Will Support Senate Bill (2:03 p.m.)

              Republican John McCain of Arizona said in a statement Thursday that he’s decided to support the Senate tax bill — helping GOP leaders get one step closer to passing their overhaul.

              McCain hadn’t taken an official position on the tax plan until now — and no one was taking his vote for granted after he shocked the political world by voting against a rushed attempt to demolish the Affordable Care Act this summer.

              “I believe this legislation, though far from perfect, would enhance American competitiveness, boost the economy, and provide long overdue tax relief for middle class families,” McCain said in the statement.

              The Arizona lawmaker joins Lisa Murkowski of Alaska — another GOP senator whose support had been in question — in publicly endorsing the Senate tax bill in recent days. The GOP has a slim majority in the Senate, and can only afford to lose two of its 52 members to pass a bill without Democratic support. Republican senators that could still prove difficult votes include Susan Collins of Maine, Bob Corker of Tennessee, Jeff Flake of Arizona, James Lankford of Oklahoma and Ron Johnson of Wisconsin.

              Negotiations were ongoing Thursday to address some of the senators’ concerns, including over a trigger provision that would automatically increase taxes if economic growth doesn’t meet revenue targets.

              It’s unclear how long the 20 hours of tax debate currently ongoing will stretch. It could continue into the wee hours of Friday morning before kicking off the unlimited amendment vote series known as “vote-a-rama” overnight. Republican leaders said Thursday morning they hadn’t yet decided whether to just resume the process Friday morning, since an all nighter for some members would be hard, according to Collins. McCain is 81 and battling brain cancer.

              McCain has pushed for the Senate to return to regular order — hearings, markups, bipartisan input and amendments — for passing major bills, including tax legislation. He had signaled support for the Senate Finance Committee’s process after it approved a tax proposal earlier this month.

              McCain has had a mixed record on tax cuts, voting against measures in 2001 and 2003, citing deficit concerns.

              “I take seriously the concerns some of my Senate colleagues have raised about the impact of this bill on the deficit,” McCain said. “However, it’s clear this bill’s net effect on our economy would be positive.”

              McCain’s statement added to an already buoyant tone in the U.S. stock market. The Dow Jones Industrial Average extended its climb past 24,000 while the S&P 500 was set for its longest monthly winning streak since 2007, rising more than 1 percent. The dollar erased earlier losses, gaining as much as 0.6 percent against the yen as Treasuries declined, sending 10-year yields above 2.4 percent, to their highest level so far this month. — Alexis Leondis and Chris Nagi

              Collins Says ‘Not Committed’ on Bill Yet (9:33 a.m.)

              Republican Senator Susan Collins of Maine said it “would be very difficult” to support the Senate tax bill unless Congress agrees to preserve an individual deduction for state and local property taxes and passes separate legislation to support the individual health care market.

              “I am not committed to voting for this bill,” she said during a breakfast session organized by the Christian Science Monitor. She has said that Senate Majority Leader Mitch McConnell has committed to making health care legislation a priority.

              Collins also said she’ll pursue an amendment to enhance the child tax credit — and pay for the revenue cost by ending the “carried interest” tax break that favors investment managers. Carried interest is the portion of an investment fund’s profit — usually 20 percent — that’s paid to investment managers. Currently, it’s taxed as capital gains, meaning it qualifies for a tax rate as low as 23.8 percent. The top individual tax rate is currently 39.6 percent.

              The Senate bill would address carried interest by requiring that only gains on assets held more than three years — up from one year — would qualify for the break. Collins called that provision “modest.”

              Collins’s health-care concerns center on the Senate bill’s provision to repeal the Obamacare law’s individual mandate, which requires individuals to buy health insurance. Repealing the provision is estimated to save the federal government more than $300 billion over 10 years and result in roughly 13 million fewer insured people.

              On the property-tax deduction, Collins said she’s seeking a provision that would mirror the House bill approved earlier this month: retaining the break for property taxes, but capping it at $10,000. Currently, the Senate bill proposes to abolish deductions for all state and local taxes. — Erik Wasson

              Corker Says Trigger Deal Still Facing ‘Difficulties’ (4:00 a.m.)

              Senate Republicans are looking to approve their tax-overhaul legislation as soon as Thursday night — but wrangling continues over whether to include a trigger for tax increases if economic growth doesn’t meet revenue targets.

              “They’re having a few difficulties but hopefully in the morning they’ll have something,” Senator Bob Corker of Tennessee, who’s pushing for the trigger mechanism, said Wednesday evening. “There’s nothing to show right now.”

              Corker and Republican Senator Pat Toomey of Pennsylvania are negotiating over the trigger concept, according to Senate Majority Whip John Cornyn of Texas. Corker and Toomey, both members of the Budget Committee, reached an agreement in September that allowed a budget that would add to the deficit.

              Toomey said a deal would be announced Thursday, but declined to provide details.

              Corker, along with Arizona Senator Jeff Flake and Oklahoma Senator James Lankford, have said their votes are contingent on the tax trigger. Others, like Senator Thom Tillis of North Carolina have said they are wary of the effect on the economy of tax increases during a recession.

              While Senate Finance Chairman Orrin Hatch said he thought it was likely a trigger would be included, Senator David Perdue of Georgia countered that saying: “There is no foregone conclusion that we will have a trigger. Because there is a debate going on about that.”

              “We’re not going to do anything to jeopardize this bill,” Perdue said.

              In addition to deciding whether or how to include a future tax increase if revenue targets aren’t met, Republicans may have to tweak or add other provisions during the next 24 hours or so to secure the votes they need. Another change in the works would deepen the tax cut for pass-through businesses such as partnerships and limited liability companies.

              All 52 Senate Republicans united to vote to open debate on the $1.4 trillion tax-cut measure Wednesday in the latest sign that the bill has the momentum it needs to pass. Republicans must have 50 of their 52 members vote “aye” in order to send the bill to a planned House-Senate conference, the next step in GOP efforts to get tax legislation to President Donald Trump by the end of 2017.

              The Senate is now spending 20 hours of limited debate time on the tax bill. During that period, Democrats may try to strip out parts of the bill by raising objections to them based on Senate rules. Republican staff members have been working to tweak tax and oil-drilling provisions in the bill to comply with rules meant to exclude provisions that aren’t primarily fiscal in nature.

              The formal debate time is set to expire close to midnight on Thursday, after which an unlimited amendment vote series known as “vote-a-rama” would ensue. Senators could agree to speed up the debate and start the amendment votes sooner.

              During vote-a-rama, Democrats are likely to offer numerous amendments meant to highlight any flaws they believe the bill contains. Democrats say the bill gives most tax benefits to the wealthy while raising taxes on many in the middle and working class, in addition to increasing budget deficits.

              “What’s on offer is a plan to force working people and middle-class families to pay for handouts to corporations and tax cheats," said Democratic Senator Ron Wyden as debate kicked off Wednesday evening.

              Republican Senator Mike Enzi, chairman of the Budget Committee, disputed that characterization. “We need tax reform that will make our system simpler and fairer and allow people to keep more of what they earn,” he said. “This bill before us would do that.”

              Some Republicans are expected to offer amendments that would be paid for by setting the corporate rate higher than the 20 percent proposed in the Senate tax bill. The current corporate rate is 35 percent.

              Moderate GOP Senator Susan Collins filed an amendment that would retain the individual deduction for state and local property taxes and cap it at $10,000 for individuals — mirroring the House tax bill. She said she would pay for the change with a 21 percent corporate rate and by keeping the individual top rate at 39.6 percent.

              “I think it’s significant that many members believe that we don’t need to go all the way to 20 percent in order to spur investment and job creation,” Collins said.

              Republican senators Mike Lee and Marco Rubio also plan to make the bill’s child tax credit refundable up to 15.3 percent of earnings, paid for with a 22 percent corporate rate.

              Behind the scenes, Republicans will be crafting a final substitute amendment containing any changes they’ll need to get the required 50 votes.

              Wavering senators Steve Daines of Montana and Ron Johnson of Wisconsin appear to be on track to support the bill after securing a 20 percent deduction for pass-throughs, an increase from the 17.4 percent in the draft bill. Johnson said Wednesday he expects to see the larger deduction included in the final version of the Senate legislation. He added he would support an amendment calling for the elimination of state and local tax deductions for corporations. — Erik Wasson, Kaustuv Basu, Allyson Versprille and Laura Davison

              What to Watch on Thursday:

              • Senate Republicans approved the “motion to proceed,” 52-48, on party lines. After up to 20 hours of debate, the chamber will begin considering a series of amendments proposed by senators in what’s known as a “vote-a-rama” marathon that’s likely to end with an amendment by Republican leaders incorporating all the changes.
              • Tax writers may release details of the trigger concept. GOP senators have discussed a provision that would allow for as much as $350 billion in automatic tax increases starting in 2022. Republican Senator Ted Cruz of Texas has said he’s working on a trigger provision that would apply two ways and bring additional cuts if there’s robust growth.
              • The nonpartisan Joint Committee on Taxation may release a “dynamic scoring” analysis of the bill’s effect on the deficit.

              Here’s What Happened on Wednesday:

              • President Donald Trump said the tax overhaul would hurt him financially, disputing findings from the non-partisan Congressional Research Service and other analysts saying top earners would benefit more than the middle class.
              • Senate Republicans agreed to raise a proposed deduction for pass-through businesses, such as partnerships and limited liability companies, to 20 percent from 17.4 percent, according to Republican Senator Steve Daines of Montana.
              • Republicans Senators Marco Rubio and Mike Lee said they plan to introduce an amendment that would enhance the child tax credit — and offset the cost by setting the corporate rate at 22 percent, higher than the 20 percent rate President Donald Trump favors. The White House said the president doesn’t support the amendment.
              • Republican Senator Susan Collins of Maine said she would vote to begin debate after she got a commitment from Republican leaders to put legislation aimed at stabilizing Obamacare’s insurance exchanges on a must-pass bill next month.
              • The bill got an important commitment as GOP Senator Lisa Murkowski of Alaska said she would vote for it.

                Read more:

                The GOP Tax Plan Is Entering Its Make-or-Break Week

                The $1.4 trillion item on President Donald Trump’s wish list — a package of tax cuts for businesses and individuals that he has said he wants to sign before year’s end — is headed into the legislative equivalent of a Black Friday scrum next week.

                Senate Republican leaders plan a make-or-break floor vote on their bill as soon as Thursday — a dramatic moment that will come only after a marathon debate that could go all night. Democrats are expected to try to delay or derail the measure, and the GOP must hold together at least 50 votes from its thin, 52-vote majority in order to prevail.

                Their chances improved this week when Republican Senator Lisa Murkowski of Alaska said she’ll support repealing the “individual mandate” imposed by Obamacare — a provision that Senate tax writers are counting on to help finance the tax cuts. Murkowski had earlier signaled some reservations about the provision; and her support was widely viewed as a positive sign for the tax bill’s chances.

                Trump is scheduled to address Senate Republicans at their weekly luncheon Tuesday afternoon on taxes and the legislative agenda for the rest of the year, according to a statement from Senator John Barrasso, chairman of the Senate Republican Policy Committee. 

                The White House previously announced that the president would talk with Republican and Democratic congressional leaders at the White House the same day about an agreement on spending to keep the government open after funding expires on Dec. 8. David Popp, a spokesman for Senate Majority Leader Mitch McConnell, and Drew Hammill, a spokesman for House Democratic leader Nancy Pelosi, both said that meeting is still on the schedule.

                If the tax bill clears the Senate — a step that’s by no means guaranteed — lawmakers in both chambers would have to hammer out a compromise between their differing bills, a process that presents potential pitfalls of its own. For now, though, much of the Senate’s attention will focus on its legislation’s price tag.

                Three GOP senators — Bob Corker of Tennessee, Jeff Flake of Arizona and James Lankford of Oklahoma — have cited concerns about how the measure would affect federal deficits. Independent studies of the legislation have found that — contrary to its backers’ arguments — its tax cuts won’t stimulate enough growth to pay for themselves. Both the Senate bill, and one that cleared the House earlier this month, would reduce federal revenue over a decade by roughly $1.4 trillion, according to the Joint Committee on Taxation.

                On Wednesday, a report from the Penn Wharton Budget Model at the University of Pennsylvania said the bill would reduce federal revenue in each year from 2028 to 2033. That finding would mean it doesn’t comply with a key budget rule that Senate Republican leaders want to use to pass their bill with a simple majority over Democrats’ objections.

                Budget Rule

                In essence, that rule holds that any bill approved via that fast-track process can’t add to the deficit outside a 10-year budget window. The JCT has already found that the Senate bill would generate a surplus in its 10th year because it has set several tax breaks for businesses and individuals to expire.

                But JCT hasn’t yet weighed in publicly on the revenue effects in subsequent years. Senate GOP leaders have expressed confidence that their proposal will satisfy the rule ultimately.

                Another potential stumbling block stems from the fact that Congress is trying to act on complex tax legislation under a tight, self-imposed timeline in order to deliver on promises from Trump, House Speaker Paul Ryan and McConnell.

                For example, Republican Senator Ron Johnson of Wisconsin has said he can’t support the current Senate bill because it would give corporations a tax advantage — a large rate cut to 20 percent from 35 percent — that other, closely held businesses wouldn’t get.

                ‘Change the Most’

                His concern centers on the Senate’s plan for large partnerships, limited liability companies, sole proprietorships and other so-called “pass-through” businesses. Under current law, these businesses simply pass their earnings to their owners, who pay income taxes at their individual rates — currently, as high as 39.6 percent, depending on how much they earn.

                Read more: A QuickTake guide to the tax-cut debate

                The Senate bill would provide pass-through owners with a 17.4 percent deduction for income — but in combination with other provisions, that would result in an effective top tax rate for business income that’s more than 10 percentage points higher than the proposed corporate tax rate.

                The House bill would use an entirely different approach, setting a top tax rate of 25 percent for pass-through business income, but then limiting how much of a business’s earnings could qualify for that rate.

                Reconciling those differences — and addressing Johnson’s concern — may be a complicated process. “That’s part of the equation that could change the most over the next few weeks,” Isaac Boltansky, senior vice president and policy analyst at Compass Point Research and Trading LLC, told Bloomberg Tax. “No one is planning around it yet. There is uncertainty across the board.”

                Meanwhile, the Obamacare issue looms in the background — threatening at least one GOP senator’s vote. Susan Collins of Maine said earlier this week that tax bill “needs work,” and “I think there will be changes.”

                The 2010 Affordable Care Act — popularly known as Obamacare — contained a provision requiring individuals to buy health insurance or pay a federal penalty. Removing that penalty in 2019, as the Senate tax bill proposes to do, would generate an estimated $318 billion in savings by 2027, according to the Congressional Budget Office. The savings would stem from about 13 million Americans dropping their coverage, eliminating the need for federal subsidies to help them afford it.

                Because many of the newly uninsured would be younger, healthier people, insurance premiums would rise 10 percent in most years, the nonpartisan fiscal scorekeeper found.

                  Read more:

                  Junk-Bond Rally Unravels, One Bad Earnings Report at a Time

                  The run-up in junk bonds is showing signs of returning to earth.

                  After a spate of bad news triggered sell-offs of a few big speculative-grade borrowers, the pain has spread and even led NRG Energy Inc. to pull a $870 million bond offering on Thursday. Exchange-traded funds that buy high-yield debt have plunged the most since August, with $563 million of retail outflows since the start of this week alone. Three of the biggest junk-rated borrowers, IHeartMedia Inc., CenturyLink Inc. and Community Health Systems Inc., posted disappointing earnings that sent their bonds plunging.

                  It’s hard to say whether the sell-off will accelerate. Others like it have largely been treated as buying opportunities for yield-starved asset managers. But with more supply to come, investors may be less willing to take a chance on shaky companies, especially with yields at historical lows. Matt Eagan, a debt-fund manager at Loomis Sayles & Co., said he’s not going to start buying until the market sells off by another 3 percent to 5 percent.

                  “It seems like buyers have simply stepped away from the market,” Eagan said in an interview with Bloomberg Radio Thursday. “I wouldn’t be buying the market.”

                  The telecom sell-off that was exacerbated by failed merger talks between Sprint Corp. and T-Mobile US Inc. has slowly crept into health-care bonds and the broader high-yield market as investors try to cash out before it’s too late.

                  “It’s only the beginning,” said Jack Flaherty, a portfolio manager at GAM Holding AG who’s been buying better-graded bonds to hedge high-yield risk. “We’re starting to see a welcome correction,” he said in an interview.

                  Investors are increasingly scrutinizing specific companies and rejecting their bonds when they see a problem. Alongside the earnings-driven sell-offs at Community Health and IHeartMedia, mega-deals from Staples Inc., Tesla Inc. and Netflix Inc. have traded below their face value. Tesla’s benchmark bond fell to a new low of 93.5 cents on the dollar Thursday, according to data from Trace.

                  “It feels like it’s spreading,” Mike Collins, senior investment officer at PGIM Fixed Income, said in an interview. PGIM has been cutting its exposure to high-yield debt since the beginning of the year, especially BB rated companies. 

                  “It’s starting to reverberate through the credit markets more,” Collins said. “If you have more dispersion, you’re going to have more losers.”

                  Easy Money

                  It’s hard to overstate the easy-money conditions that allowed U.S. high-yield bond markets to thrive the past eight years. The debt has returned more than 14 percent on average every year since 2009 as the Federal Reserve dropped overnight rates to near zero and bought billions of dollars of bonds. Junk-bond yields are still three percentage points below the two-decade average, but the Fed is raising rates at a faster pace and other central banks are hinting they may reduce stimulus in the near future. 

                  Meanwhile, the much-anticipated Republican tax plan is coming into focus. 

                  The Senate version would delay the corporate rate cut until 2019, Bill Cassidy, a Louisiana Republican, said Thursday. And House Republicans have proposed reducing interest deductibility, a key benefit for the junkiest of borrowers. About 40 percent of the high-yield market could feel the pinch, Bank of America Corp. strategist Oleg Melentyev said in a Nov. 3 report.  

                  But not everyone is ready to bail just yet.

                  “There’s stress in significant pieces of the markets, like health care and telecom, and I am not ignoring them,” Ken Monaghan, director of global high yield at Amundi Pioneer, said in an interview. “But we aren’t seeing some sort of cataclysmic event on the horizon, and I am not expecting many sleepless nights anytime soon.”

                  Still, even if the sell-off doesn’t devolve into a rout, many investors are holding back and watching the action a little more closely.

                  “In size and scale it’s not gargantuan, it’s a drop in the bucket,” Henry Peabody, a money manager at Eaton Vance Corp., said in an interview. “But that’s how corrections start.”

                    Read more:

                    How the Humble Hospital Scrub Became a $10 Billion Business

                    The line between symbiosis and mortal combat is a fine one, both in the C-suite and at the cellular level. Michael Singer and Ben Favret thought they had the former when they began making plans for a better, safer line of medical apparel—a super scrub, if you will.

                    Singer is chief executive officer of Strategic Partners, a manufacturer that controls an estimated 40 percent of the U.S. market for scrubs. Favret, a former pharmaceutical executive, is founder of Vestagen Protective Technologies, a startup launched in 2009 with the goal of making a bacteria-proof medical uniform.

                    “He just seemed interesting, infectious in his enthusiasm,” Singer said of meeting Favret. “And he helped convince me antimicrobial was going to be something in the future.”

                    Last month, the men and their respective companies faced each other across a federal courtroom in Los Angeles—each having sued the other. Their fleeting partnership had turned toxic as both accused the other of tearing their respective company apart. Vestagen was making false and illegal promises about its product, Singer alleged. Singer had poached one of Vestagen’s key employees and stole trade secrets, Favret claimed. As the Swift anthem goes, we got bad blood.

                    The humble hospital scrub, ever saggy and often scratchy, is never in style—or out of it, for that matter. Rather, it’s beyond sartorial judgment. Instantly recognizable, it’s simply a given for most of America’s 19 million health-care workers, as essential as latex gloves and bitter cantina coffee. At the moment, almost one in seven U.S. workers falls into the scrub-set, a metric that’s expanding quickly as baby boomers fade into their hip-replacement years.

                    Make no mistake, apparel seldom seems this easy. In other parts of the clothing business, fortunes are won and lost trying to forecast the fickle fashion trajectories of skinny jeans, retro sneakers, jumpsuits, and leggings. Abercrombie & Fitch is ripping off its logos and rushing to remake the kind of rugged adventure-wear that built its brand 50 years ago, and J. Crew Group has drifted to the brink of solvency as it struggles to find the right mix of rugby shirts and shift dresses. The sturdy scrub, meanwhile, has emerged as one of the safest spots in retail. Like the work-shirts and pants Americans wore back when the country was an industrial behemoth, health-care-wear is very much in demand in the modern service economy.

                    If medical apparel were a standalone business, it would be solidly among the world’s top retailers, bigger than EBay, Foot Locker, and Tiffany & Co. Much of those spoils, at the moment, go to Strategic Partners, a business Singer started in 1995 when he bought the scrubs business out of bankruptcy from Cherokee. “The joke at the time was the three bestselling colors were white, white, and white,” he said. He took control of 40 workers posting about $17 million in annual sales.

                    Over the years, the company added colors and patterns, moved production to Mexico and later to Asia while gradually building out a closet of brands. It added a studio where it created designs and cut licensing deals so it could put cartoon characters on pediatric scrubs to cheer up sick kids.

                    In the early 2000s, Strategic began building web stores for its retail partners, taking the orders and shipping the product directly. Most of the retailers weren’t putting much focus on the internet at the time, and it was a crafty way to box out competing brands. By 2005, the company had almost 500 employees and a deep bench of captive manufacturing partners. Five years later, it acquired the license to make a line of “Dickies” scrubs and added another 30 employees. 

                    Around that time, Singer started talking to Vestagen and other startups about antimicrobial treatments. Vestagen, which declined to be interviewed for this story, citing the ongoing legal battle, had developed an “active barrier” to repel fluid from fabric and kill bacteria via an electrical charge.

                    Vestagen’s timing was propitious. As it was looking for manufacturing partners, bacterial infections were running rampant in America’s hospitals and clinics. In 2011, patients at acute-care facilities came down with almost 722,000 so-called health-care-associated infections, pneumonia being the most common. Almost one in 10 of those patients died, or about 70,000, according to the Centers for Disease Control & Prevention. Not surprisingly, insurance companies began adding clauses to their coverage so they wouldn’t have to pay hospitals for bacterial outbreaks.

                    The simple scrub, meanwhile, was starting to look like a disease vector. The CDC estimates that one in 25 patients currently hospitalized has contracted some kind of infection just by being there. 

                    Most of the folks who wear scrubs have to buy their own, despite the fact the job typically requires them, be it a hospital, doctor’s, dentist’s, or veterinarian’s office. Apparel makers can line up discounts and distribution deals, but ultimately the consumer can buy whatever uniform he or she wants, provided it’s the specified color. This little wrinkle in the market, it turns out, presented an opportunity. While lawyers for Singer and Favret fight, a host of startups have discovered there’s a lot of money to be made in this sleepy-yet-lucrative segment. Moving on from mattresses, eyeglasses, razors, and booze delivery, the world’s direct-to-consumer disrupters have discovered scrubs.

                    FIGS was launched in 2013, offering antimicrobial, wrinkle-free uniforms in a range of flattering designs, solely through its own web store. Founder Trina Spear said she warmed to the idea at investment firm Blackstone Group, where she said she worked on a financing deal for Strategic Partners. In the financial reports, Spear said she noticed a staid company with margins around 40 percent. 

                    FIGS co-founder Trina Spear says her company is the first to take a fashion approach to scrubs.
                    Source: FIGS

                    “It’s a massive industry that no one knows about and no one talks about,” she said. “It’s been around for about 100 years with zero change and zero innovation.” Her company sold out of its first batch in 23 days and has struggled to keep up with demand. Now FIGS has spread into lab coats, “underscrubs” (read: T-shirts), and hoodies. 

                    About a year later, Jaanuu hit the market with a similar approach, launched by Shaan Sethi, a private-equity investor, and his pediatrician sister, Dr. Neela Sethi Young. Sethi said he was most encouraged by what he called a broken retail channel. Hundreds of different stores were selling scrubs, each store packed with a motley jumble of competing brands. 

                    “You’d go to a hospital and see 50 or 60 nurses in 50 or 60 different brands,” he explained. “I had this idea in the back of my mind around this concept of trading up.” Spear, at FIGS, is less diplomatic. “Honestly, it’s hard for me to call them brands,” she said. “Everyone is getting thrown a hodge-podge of crap.”

                    Naturally, all this rankles Singer at Strategic, which is now owned by New Mountain Capital, a private-equity firm. The U.S. scrubs market is far smaller than his new rivals let on, he warned, and his designers have decades of experience developing more fashionable treatments. “I bristle a little when I hear Jaanuu and FIGS say these are just commodity products,” he said.

                    A post shared by FIGS (@wearfigs) on

                    It’s hard, however, to find a brand evangelist in American hospitals—the field remains wide open. No label seems to have captured the kind of devotion Nike has among athletes or Lululemon enjoys with yogis. In just two years as a technologist measuring brain activity at the University of Iowa hospital, Mandie Wagner has purchased a closet full of scrubs. She said the Dickies are kind of itchy, the Cherokee brand doesn’t fit very well, and the Grey’s Anatomy scrubs collect pet hair. Her go-to, at the moment, is Cherokee’s Infinity, a higher-end brand made by Strategic, although she is keen to try FIGS and Jaanuu. 

                    So far, the best feature Wagner has found isn’t having to think about what to wear: “It makes my morning easier,” she said. Wagner’s colleague Wendy Sebetka hasn’t settled on a brand, either. “Even though I buy the same styles, they all seem to fit a little differently,” she said. “And everything I have purchased online I have had to return, which is a pain.”

                    It still isn’t clear how much of the segment has been swiped by FIGS, Jaanuu, and other new entrants. Both companies declined to detail revenue. FIGS now has 35 employees and increased sales 17-fold in the past two years. It has raised $10 million from investors in two different rounds. Of the customers it’s won, more than half are ordering apparel from the company every month. “We believe we can take over the whole industry,” Spear proclaimed. “That’s our goal.”

                    Jaanuu, meanwhile, has 50 employees and $7.6 million in venture funding. The company expects to triple revenue this year, thanks in part to a new line of plus-size scrubs and footwear. Its average order is $120—and when orders come, they come in clusters. When a customer buys in a small town in, say, North Dakota, a flurry of other orders pop up in the same location.

                    “You have to remember, this isn’t Nasty Gal going after Forever 21,” Sethi said. “We’re going after a really, really sleepy market.”

                    Jaanuu’s plus-size line has quickly accounted for 10 percent of its business.
                    Source: Jaanuu

                    In the long run, Singer likes his odds of staying on top. His company now has almost 600 employees and last year sold $300 million worth of scrubs in the U.S. Working with Dow Chemical, it began selling an antimicrobial scrub in 2014 and a version with a fluid barrier a year later.

                    And despite the simplicity of the product, a scrubs empire requires a complex supply chain. At any given time, Strategic has about 85,000 items, across a range of brands, colors, and prints, and in a spectrum of sizes for both women and men.

                    “There aren’t necessarily high barriers to entry, but there are high barriers to scale,” Singer said. “There’s styling complexities. There’s sourcing complexities. There’s long, long lead times and you have to manage all of this inventory as you go.”

                    Back in the courtroom in Los Angeles, Vestagen’s allegations of stolen trade secrets were rejected. The jury, however, dismissed Strategic’s assertion that Vestagen had made false advertising claims. Vestagen promptly declared victory and announced another $9.5 million in financing. “We always believed that this lawsuit brought by SPI, a company many times the size of Vestagen, was being pursued in an attempt to stifle an emerging competitor,” Chief Executive Officer Bill Bold said in a statement. Strategic, meanwhile, asked the judge to set aside the jury’s findings.

                    While keeping an eye on the litigation, Singer is still pushing to expand Strategic’s already big footprint. The company is seeing brisk demand for Careisma, a brand it launched last year with actress Sofia Vergara. In 27 years of business, Strategic has seen sales decline only once, in the aftermath of the financial crisis. Singer said he doesn’t expect 2017 to be a second.

                    (Corrects spelling of Sofia Vergara’s name in last paragraph.)

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