cannabis plant from above

Australia's medical cannabis market is growing, with recreational legalisation and exports presenting future opportunities for savvy investors.

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 for the cannabis industry in Australia and what they may mean for investors.

Investing in cannabis stocks on the ASX: Market overview

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 from Grand View Research, researchers state that the legal cannabis market in Australia is poised for large increases in the coming years. Valued at AU$51.8 million in 2021, this number is projected to rise at a compound annual growth rate of 30.1 percent until 2028.

However, in recent years the country has been hit by the slump dragging down cannabis markets across the world. Among other impacts, this has brought a drastic shift in international investment, with some Canadian firms adjusting their Australian expansion plans due to the conditions seen in the cannabis industry.

Despite the struggles seen in the stock market, the Australian cannabis industry has seen some pick-up thanks to the rush of new medical cannabis products becoming available to consumers.

According to a report from cannabis research firm FreshLeaf Analytics, during H2 2021, market growth exceeded expectations, and the country's patient count climbed to near 100,000.

“Although we note the early stage of the sector in Australia and the associated volatility of a nascent industry, over the same period patient numbers domestically have continued to soar,” the note explains.

The rise in patient approvals could be due to legislation put in place in New South Wales that loosened the requirements for prescribing medical cannabis. Now, unless a patient is under 16 years old or has a history of drug abuse, medical practitioners in the state can prescribe cannabis medicines without having to refer to a specialist.

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.

Investing in cannabis stocks on the ASX: Avenues for growth

As Australia's medical cannabis market grows, other avenues for expansion are also opening.

Australia has seen an increased push to okay cannabis for recreational use since the Australian Capital Territory announced plans to legalise the drug in September 2019; it was the first region in the country to do so.

The new 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 Hemp Industry Act (2019), allows commercial uses of the hemp plant, and a bill was introduced in February 2021 by Cate Faehrmann that would legalise cannabis products in New South Wales.

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.”

Investing in cannabis stocks on the ASX: How to get started

The universe of ASX-listed cannabis stocks is small, but there are certainly options for investors willing to do a little research. To get started, check out these lists on the topic:

Investing in cannabis stocks on the ASX: Investor takeaway

Though Australia's cannabis industry is still in its early stages, increased patient numbers and a push toward recreational cannabis use could open the market to novel investment opportunities.

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.

Don’t forget to follow us @INN_Australia for real-time news updates!

Securities Disclosure: I, Ryan Sero, hold no direct investment interest in any company mentioned in this article.

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