(Adds banker, CEO and analyst comments, updates share price moves)
By Euan Rocha and John Tilak
TORONTO, Oct 20 (Reuters) - Shares of the nascent medical marijuana industry surged as much as 8 percent on Tuesday after Canada's Liberal leader Justin Trudeau, who has vowed to legalize marijuana, secured a historic victory in the federal election.
The Liberals swept to power with a clear majority, paving the way for Trudeau to work on legislation that would let marijuana companies focused on the small medical sector to expand into the much larger recreational market.
"If the recreational market suddenly had a framework and it was legal tomorrow the uptake from Canadians would be very, very quick," said Dundee analyst Aaron Salz.
The Canadian medical marijuana market is currently estimated to be worth C$80 million to C$100 million annually. Opening the market to recreational users, that value could rapidly jump to C$2 billion to C$5 billion, said Salz.
TSX Venture-listed Canopy Growth, the first company to go public in the sector in Canada last year under the name Tweed Marijuana, rose 7 percent to C$2.33. Mettrum Health and Aphria, rose 8 percent and 5 percent, respectively.
"The Liberals have emphasized their desire to legalize, regulate, and tax marijuana, and with the majority government now in place, this is obviously positive for the publicly listed licensed producers," said M Partners analyst Daniel Pearlstein.
Bankers and executives adopted a cautious stance and were not breaking out the bubbly just yet.
"Massive regulatory reform that is legalization will take time and in the excitement surrounding the potential future of recreational marijuana, we should not forget the bona fides of medical marijuana," said John Fowler, chief executive officer of Supreme Pharmaceuticals, which is currently awaiting a license to grow medical marijuana.
Denis Arsenault, CEO of licensed medical marijuana producer OrganiGram, believes that any eventual recreational market would be tightly controlled on a provincial basis.
"I don't anticipate corner stores being able to pop up in every little nook and cranny (in) Canada selling recreational marijuana," he said.
That said, bankers and executives still see the Liberal win boosting investor sentiment in the sector and pushing companies to tap capital markets and explore merger-and-acquisition opportunities.
"This does change the sentiment on a go-forward basis, and we're going to see more public financings before the end of the year," said Khurram Malik, with boutique investment bank Jacob Securities. (Additional reporting by Alastair Sharp in Toronto and Leah Schnurr in Ottawa; Editing by Jeffrey Benkoe)