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Medical Cannabis Monthly Report | October

 

Key Takeaways: Cannabis ETF Monthly Report

  • Federal regulatory reform remains the biggest headwind as well as the biggest potential catalyst in the cannabis space. Investors closely watch multiple legislative bills which move forward the cannabis agenda in the US Senate. The inevitability of federal reform creates opportunity for incumbent investors to buy the pullback.
  • Pace of reform remains positive on the state level. In recent days, New York [1] has allowed for the sale of flower in their medical cannabis program whereas Pennsylvania [2] and Ohio [3] legislators are pushing for a vote on adult-use legalization which will greatly increase the total addressable markets in those states.
  • California [4] is well ahead of the pack and has recently passed a bill which builds on federal inaction after the Hemp Bill of 2018. Effectively, California has now legalized the use of hemp extracts and cannabidiols in food and beverages, dietary supplements, cosmetics, and pet food. This provides framework for many states to follow, where the hemp industry has been burdened with lack of guidance from the FDA
  • Italy’s youth [5] voices opinion on cannabis legalization by collecting 500,000 signatures in seven days seeking to legalize the growing of weed for personal use and ease sanctions on cannabis related crimes. The verification of all signatures will trigger a referendum for a nationwide vote early next year.
  • In Germany, [6] all three parties engaged in coalition talks plan to loosen the ban on cannabis possession. Reform could open up one of Europe’s biggest economies to a whole new industry which has proven to provide quick growth and fast results as per the implementation in Canada and certain US states.
  • Our medical cannabis ETF is down 7% for the month and flat on a YTD basis as investor fatigue grows around US cannabis reform. However, there are many positive stories in the pipeline which could quickly turn momentum in coming months.

 

Macro Outlook

Consistent fundamental success continues to fall on deaf ears in the US cannabis sphere as investors look to regulatory reform as the sole driver of cannabis valuations. The context of the US cannabis story is set in incremental reform as individual states continue on their paths to proliferation. Success at an operator level also continues to be ignored in the face of 20-25% QoQ sales growth posted by the top ten US operators. As investors continue to ignore fundamentals, the inevitability of federal reform is now poking through legislative chambers and a ripe buying opportunity has appeared as politicians count down towards the midterm elections next year.

After many years of uncertainty, some positive news hits the world of hemp extracts and cannabidiols. California passed Bill 45 which legalizes the use of hemp extracts in food and beverages after the FDA failed to provide guidance for the newly proliferated extract. This bill will provide additional states with the comfort needed to build on the promising CBD industry without fear of prosecution from the FDA. We expect positive tailwinds for the CBD industry as there will be increased distribution for CBD products.

 

The Medical Cannabis and Wellness UCITS ETF Performance Table (As of 30.09.2021)

 

1M

3M

6M

YTD

12M

SI

The Medical Cannabis and Wellness UCITS ETF (Acc)

-7.22%

-18.62%

-25.46%

1.10%

40.65%

43.53%

Medical Cannabis and Wellness Equity Index (NTR)

-7.18%

-18.46%

-25.23%

1.47%

41.51%

43.79%

Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 30/09/2021. Performance before inception is based on back tested data. Back testing is the process of evaluating an investment strategy by applying it to historical data to simulate what the performance of such strategy would have been. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance. Past performance for the index is in USD. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (“Prospectus”) before investing and should refer to the section of the Prospectus entitled ‘Risk Factors’ for further details of risks associated with an investment in this product. Please note that all performance figures are showing net data. 

 

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