Shanghai shares go gangbusters

China's biggest domestic airlines are among the stocks that stand to gain as Shanghai opens a free trade zone.

China's biggest domestic airlines are among the stocks that stand to gain as Shanghai opens a free trade zone.

China Southern Airlines and China Eastern have "upside", Goldman Sachs analysts wrote in a note to clients. Other companies, such as Lao Feng Xiang, a Shanghai jeweller, and Hong Kong-traded Shanghai Industrial Holdings, also stand to gain sharply.

The Shanghai Composite Index has risen 15 per cent since reaching this year's low on June 27.

Banks, shippers and port operators have all made gains since August 22, when the Ministry of Commerce said the city's free-trade zone proposal had been approved.

Shanghai International Port Group has had its shares rise 170 per cent in three weeks. China Eastern Airlines, which is based in Shanghai, has climbed 35 per cent.

"Given [any] 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," Goldman Sachs wrote.

The free trade zone is part of a plan to develop the city into a global financial and shipping centre by 2020. A draft plan includes opportunities for foreign companies in industries from banking to health insurance.