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How to Invest in Cannabis Stocks on the ASX
Australia's medical cannabis market is growing, and further state-level legalisation could be in the cards. Here's how investors can get exposure to the industry.
Australia’s cannabis market is young, but with new products coming online, a growing push toward recreational legalisation and increased clinical research, it could offer a unique investment opportunity.
Investors are eagerly awaiting the growth projected for the Australian cannabis space — with medical avenues now established, it shows signs of potentially moving into another phase with broader access.
Read on for a look at projections on Australia's cannabis industry and what investors interested in the space should know.
How have ASX cannabis stocks performed recently?
Medical cannabis was legalised in Australia in 2016, when the Narcotic Drugs Act was amended. This move allowed the plant to be grown for medical and scientific purposes, and sparked movement in the industry.
Expansion is projected moving forward. In a recent report, Grand View Research states that the legal cannabis market in Australia is poised for large increases in the coming years. Valued at AU$66 million in 2022, this number is projected to rise at a CAGR of 29.6 percent from 2023 to 2030. Last year, Grand View Research estimated that growth at 30.1 percent until 2028.
In recent years, the country has been hit by a slump that has dragged down cannabis markets across the world. Some Canadian firms adjusted their Australian expansion plans due to these conditions. While hopes are high that this downturn will end soon, it's not over yet — despite improvements in 2023, investors must be prudent moving forward.
New medical cannabis products are a bright spot in the Australian cannabis industry, but it's worth noting that users still have hoops to jump through. Currently patients have access to medical marijuana through two methods in Australia: via authorized prescribers (APs) and through the Special Access Scheme (SAS) system.
APs are healthcare professionals who are licenced to prescribe and approve the use of medical marijuana for their patients. Healthcare professionals who are not APs can apply through the SAS to the Therapeutic Goods Administration, which if approved will allow them to import and prescribe medical cannabis on a case-by-case basis.
Patient approvals through SAS-B hit 120,000 around January of 2021, but dropped to 117,000 in 2022, MJBizDaily reported. AP prescriptions shot up from zero in 2019 to 172,000 in 2022. However, data might be skewed by overlap — the same patient might receive SAS-B approval and laster AP approval, and show up in both metrics.
There’s also been a decrease in pricing pressure for medical cannabis patients throughout the country, which is helping to boost access for consumers. FreshLeaf states that monthly spending from medical cannabis patients was down to AU$395 in 2019 from AU$415, and has since further dropped to AU$278.
What are the avenues for cannabis market growth in Australia?
As Australia's medical cannabis market grows, other avenues for expansion are also opening.
The Hemp Industry Act (2019) allowed commercial use of the hemp plant, which is used to create everything from skin care to clothing to nutraceuticals. Australia has also seen an increased push to green-light cannabis for recreational use since the Australian Capital Territory announced plans to legalise the drug in September 2019.
The law came into effect on January 31, 2020, and allows individuals over 18 to possess up to 50 grams of dried flower and cultivate two cannabis plants in their home, with a maximum of four plants per residence. However, no stores sell it, and the only legal means to acquire cannabis in the state is to personally grow it. The ACT is the only Australian state with legal recreational use.
New South Wales has seen a legalisation push in recent years. Cate Faehrmann, a member of the Legislative Council for the Australian Greens, introduced a bill in February 2021 that would legalise cannabis products in the state. That bill lapsed in prorogation in February of this year; however, it was reintroduced by Faehrmann on May 10.
Cannabis exports may also be a bright spot — shipping the drug out of the country was legalised in 2018, and top markets now include countries like Germany, the UK and South Africa.
Notably, Australia has expressed its desire to become one of the largest international cannabis suppliers. Back in 2018, former Health Minister Greg Hunt said, “We’d like to be potentially the world’s number one supplier.”
A 2020 report from Prohibition Partners forecasts that medical cannabis in the Oceania region, which includes Australia, could be worth US$600 million by 2024, while recreational cannabis could rake in US$1.55 billion.
The report also says that, despite the double-digit fall of cannabis stock prices in Australia (attributed partially to the COVID-19 pandemic), production and supply lines for the local cannabis industry have been maintained.
Peter Comerford, CEO of Australia healthcare product wholesaler Anspec, said the country is in a solid position to “capitalise on whichever aspects of this new industry that it chooses.”
How to invest in cannabis stocks on the ASX?
The universe of ASX-listed cannabis stocks is small, but there are certainly options for investors willing to do a little homework. To get started, check out these lists on the topic:
- 10 Biggest ASX Cannabis Companies in 2023
- Top 3 ASX Cannabis Stocks of 2023
- How to Invest in CBD Stocks on the ASX
- ASX Cannabis Companies with Canadian Partnerships
The ASX website includes a handy list of resources you can use for researching stocks, as well as a guide on how to invest once you've chosen the companies you want to put money into. The first step is to get set up with a broker — you can choose a broker who will help you make investment decisions, or a broker who will simply execute buy or sell orders.
It's up to each individual investor to make the decisions that are right for them based on their level of risk, familiarity with the market and various other factors. When it comes to Australia's cannabis industry, it's still in its early stages, although increased patient numbers and a push toward recreational cannabis use could open up the market
The nation's expanding cannabis export space could also further the growth of its place in the global cannabis market. For now, there's time for interested investors to get in early and gain a toehold.
This is an updated version of an article first published by the Investing News Network in 2019.
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Securities Disclosure: I, Ryan Sero, hold no direct investment interest in any company mentioned in this article.
Ryan M. Sero is a writer from Southern Ontario, Canada. His background lies mostly in the arts sector, where he worked as a playwright. However, he has experience working in a variety of formats, including including commercials and corporate writing. As an editor, he has worked on fiction manuscripts, plays and financial sector documents.
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