China’s biggest domestic carriers are among stocks that will extend gains as Shanghai opens a free-trade zone, according to Goldman Sachs Group Inc.

China Southern Airlines Co. and China Eastern Airlines Corp. have share “upside,” along with Lao Feng Xiang Co., a Shanghai-based jewelry company, and Hong Kong-traded Shanghai Industrial Holdings Ltd., Goldman Sachs analysts led by Chenjie Liu wrote in a note dated today.

The Shanghai Composite Index has risen 15 percent since reaching this year’s low on June 27. Banks, shippers and port operators have paced the gains since Aug. 22, when the Ministry of Commerce said the city’s free-trade zone proposal was approved in July. Shanghai International Port Group Co. climbed 170 percent from Aug. 22 through yesterday, the most among the 995 companies on the Shanghai index. China Eastern, which is based in Shanghai, has climbed 35 percent.

“Be selective in choosing potential beneficiaries,” the Goldman Sachs analysts wrote. “Given actual earnings boost may show up only in the medium term, we prefer beneficiaries that have upsides based on existing businesses, with the Shanghai free trade zone potentially providing room for additional upside.”

The free-trade zone is part of the central government’s plan to develop the city into a global financial and shipping center by 2020. A draft plan for the area seen last week by Bloomberg News included expanded opportunities for foreign companies in industries from banking to health insurance. Details of the new zone’s policies and rules haven’t been announced.

Editors: Allen Wan and Michael Patterson. To contact the reporter on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net. To contact the editor responsible for this story: Michael Patterson at mpatterson10@bloomberg.net.

Photo Credit: The first Airbus A380 delivered to China Southern Airlines takes off from Toulouse-Blagnac airport Jean-Philippe Arles / Reuters