Pot stocks in Canada are again in the limelight with investors being very bullish on them. This sudden interest is because of the unveiling of government measures, which suggest that legalization of recreational marijuana is going to be a reality soon in the country.
The country is going to legalize cannabis, which is evident from the few developments that happened recently. Justin Trudeau, the Prime Minister of the country proposed a federal tax of 10% on recreational cannabis. He also said that Ottawa will split it in the ratio of 50:50 with the provinces. The tax proposal of 10% is lesser than what the market analysts were expecting. The tax rate in the US states where marijuana is used for recreational purposes is much higher.
Ontario has revealed its plans of dealing with things earlier, but Alberta announced a draft framework on the handling of legalized marijuana in the province last Wednesday. New Brunswick also set up a Crown corporation, which would be looking after the sale of recreational marijuana. It also signed deals with the suppliers.
Amongst all these, investors are taking a keen interest in cannabis stocks. The stock analyst at Echelon Wealth Partners, Russell Stanley is of the opinion that in such a scenario the new investors in the market can focus exactly on what the companies can produce in a legal market. The dependency on how the market can shape up in case of illegal production dwindles.
Investors actually love to buy when there is less uncertainty and this is what is making the pot stocks hot in the Canadian market. The stocks of Canada’s largest marijuana producer, Canopy Growth Corp. rose by 4% on a single day when the PM proposed the federal tax structure of 10%. The other two large producers Aurora Cannabis Inc. and Aphria Inc. also saw their stocks rise by 2.1% and 2.5% respectively. The country’s first cannabis ETF Marijuana Life Sciences Index ETF rose by 2.6%.
The shares rose because there are definite signs of the cannabis market getting legalized and secondly, the lower tax rate proposed is beneficial for licensed Canadian producers. This will help them in being competitive with the black-market players.
The cannabis stocks had rallied in March-April when Ottawa tabled the legislation trying to make it legal by July 1, 2018. Then, things started pulling back in summer months. This tax proposal has acted as a catalyst and stocks are zooming up again.
