Score check: Here’s how ASX pot stocks have responded to the US Senate result
Health & Biotech
Health & Biotech
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As ever, US politics is full of surprises — and ASX cannabis stocks have benefitted in Wednesday trade.
The Democrats won both seats in the Georgia runoff Senate races, giving them the narrowest of governing majorities in the Senate.
It’s viewed as broadly positive for US cannabis, because Democrat leaders have made it clear they plan to decriminalise marijuana if they can clear it through the upper house.
And while Australia is a much different market, those good regulatory vibes have flowed through to ASX cannabis stocks today.
A scoreboard check in early afternoon trade showed the following:
– Eight stocks with double-digit daily gains (unusually good for cannabis)
– 26 companies trading in positive territory
– Just two stocks (out of 36) trading in the red.
For now in Australia, the regulatory backdrop is focused on distribution of CBD products — a long way from the decriminalisation of recreational cannabis.
But similar to developments in Q4, the price action shows cannabis investors are keenly attuned to regulatory developments in the space.
Speaking with Stockhead this afternoon, industry analyst Cass Hunt from Freshleaf Analytics said that while US Senate developments don’t directly affect ASX stocks, it’s not hard to see why the Democrat win is good for sentiment.
“I think because the cannabis market is still so young, countries do look to one another from a regulatory perspective,” she said.
In that sense, more forward-looking markets such as Canada can provide an indication of what works and doesn’t work.
And also “one country’s decision will influence the way other countries think about cannabis”, Hunt says.
“So I suppose that’s why we’re seeing this reaction in the Australian market to the Democrat result.”
“Another thing is that with the shifting regulatory environment, you’re opening up access from a patient perspective but also from a business perspective,” she said.
“So if for example it (Democrat-controlled Senate) paves the way for federal reform and makes it easier for companies to access things like capital, then in that sense you can understand that market reaction.”
“That capital can potentially be used to fund things like further research and innovation, because the industry still only has a small number of registered products.”
In a blue-sky scenario, regulation will serve to expand the addressable market for cannabis businesses, so “you can kind of see why that chain is reverberating a bit”, Hunt said.