You know you are living in times of irrevocable change – and by extension investment opportunity – when a powerful elite in Europe holds a closed-door conclave culminating in a puff of smoke and it has absolutely nothing to do with the election of a new head of the Roman Catholic Church.
That is exactly what happened earlier this month when, for the first time since its inception 48 years ago, the business of cannabis was on the official agenda of the World Economic Forum in Davos, Switzerland.
While much of the chat at a select three-hour lunch – playfully dubbed the “Cannabis Conclave’’ by organisers – at the sub-zero alpine retreat focused on the booming markets of Canada and the United States, there were several discussion sessions at which the potential of emerging cannabis markets in Asia was on the table.
The Davos debut of pot came hard on the heels of the region’s first cannabis investor symposium, held in Hong Kong late last year, attracted 200 people, but only after the organisers – Arcview, a San Francisco-based cannabis investment firm – gave the city authorities a written assurance that none of product under discussion would be on the premises.
The Hong Kong event is expected to be followed up by a similar gathering in Thailand later this year.
Arcview estimates cannabis will grow into a $57 billion global industry within the next decade, up from about $13 billion now. While most of the spending will take place in North America and Europe, Asia’s contribution is expected to rise as countries such as Thailand, Malaysia, Singapore and South Korea mull over legalising medical marijuana.
The Bloomberg Intelligence index of North American cannabis stocks – a possible bellwether for the future of cannabis stocks in Asia – returned 56% over the 12 months of 2018, outpacing Bitcoin, gold and any major equity index.
Counter-intuitive as it may seem given the zero-tolerance attitude towards drug trafficking and possession in this part of the world, leading players in the cannabis industry say that Asia is poised to emerge as long-held attitudes soften and the money-making possibilities multiply.
An indicator of the region's potential to become a cannabis pot of gold came in February last year when shares in the Hong Kong Stock Exchange-listed Meilleure Health International Industry Group soared 35% after it issued 312 million new shares to top Chinese hemp producer Hemp Investment Group for about HK$109 million.
The companies are exploring medical uses for cannabis in China, the world’s biggest producer of industrial hemp. Chinese companies also own 309 of all 606 cannabis-related patents worldwide.
In a statement issued at the time of the deal, Meilleure Health said it would use the net proceeds from the subscription to enlarge its capital base and prepare for any business development opportunities.
The statement added that this would include "...especially the development of the hemp health industry and the production of epilepsy, antidepressant, analgesic and Alzheimer’s disease prevention and treatment products, with cannabinoids as a core component".
Hemp is a variety of cannabis that contains only trace amounts of tetrahydrocannabinol – more commonly known as THC – the active ingredient which results in a “high” after smoking the drug.
CannAcubed, a Singapore-based cannabis and biotech company told the Hong Kong symposium that while the growth and consumption of marijuana is illegal in China, government-backed research and development work into cannabis and its application for medical use has been under way for several years.
Glenn Davies, group chief executive officer of CannAcubed said: "For the last five years at a government level China has had a lot of money invested in research and development without anyone's knowledge or help."
Saul Kaye, the chief executive officer of Israel Cannabis, or iCan, who attended the Davos conclave and helped organise the Hong Kong investor symposium told FinanceAsia:
“The cat is out of the bag, the cannabis conversation is well under way. The reality is Canada went fully legal on Oct 17 (2018) and it changed the world. The sky didn’t fall in, kids continued to go to school and Canadians continued to pay taxes, in fact, even more tax than before.
“On the back of the Hong Kong investor symposium we found that there are many Chinese interested in investing in cannabis. It is no different from investing in anything else, it is all about return. Investors are often agnostic about the industry they invest in, what they care about is how quickly the money can come back.’’
The iCan CEO also believes investors have a keen sense of the “riskiness” of investing in this or that business and applies the internal logic of that sense to the business of pot.
“As cannabis is legitimised that risk level goes down and interest in investing goes up,’’ he said.
Kaye believes that in terms of capital markets Hong Kong can be a gateway to mainland China.
"Outside of Toronto, which is the most active exchange in terms of cannabis equity ahead of Australia and Israel stock markets, I believe Hong Kong and Singapore will be next,’’ Kaye said.
Kaye also points to China’s historical relationship with hemp and other naturally occurring herbal products.
“If you couple this with centuries of experience and innovation in the field of traditional herbal medicine, we are just adding to the mix with medicinal applications of cannabis," he said. "The scope for successful investment is huge both in the internal domestic Chinese market and for export.”