Hong Kong stocks edged higher on Thursday, with the benchmark holding up on the back of a global rebound in risk assets after US President Donald Trump rescinded the tariff threat against Europe and a sell-off in Japanese bonds came to a tentative halt.

The Hang Seng Index advanced 0.2%, while the Hang Seng Tech Index rose 0.3%.

In terms of star stocks, Pop Mart rose 6%; Li Auto, Baidu, and Laopu Gold rose 4%; Bilibili rose 3%; NIO rose 2%; Alibaba and JD.com rose 1%; while CATL fell 3%; MiniMax and Mixue Group fell 2%; Tencent fell 0.8%; Xiaomi fell 0.5%.

Sentiment stabilised after Trump said at the World Economic Forum in Davos that his administration clinched a framework agreement with Nato over Greenland and would not pursue a 10 per cent tariff on exports from the continent’s key nations. The president also ruled out the possibility of taking the Danish island by force, though he did not give details on the deal.

While the market cheered the apparent detente, the tail risk of geopolitical conflicts was still hanging over stocks, as the Greenland issue was not solved entirely and tariffs remained as a weapon that could be picked up at any time, according to Stephen Innes, a managing partner at SPI Asset Management.

“Geopolitical risk still commands a higher premium than it did a year ago,” he said. “What changed was not the destination, but the timing. The imminent risk was deferred, and that was enough to spark a relief rally.”

Investors also took some comfort from a bounce-back in long-dated Japanese government bonds after buying by domestic insurers and attempts by financial officials to talk up the market. The yield on the 40-year Japanese government bond dropped by 2.8 basis points to 4.010 per cent on the day, extending a decline of 17.4 basis points on Wednesday.

The debt had endured heavy bouts of sell-offs, with the yield surging to a record high of 4.213 per cent this week, on concerns that Prime Minister Sanae Takaichi’s plan to cut consumption taxes would strain the government’s ability to repay debts. The tumult extended to US Treasuries, prompting investors to reassess sovereign debts’ term-premium risk and recalibrate their portfolios.

Falling bond yields reduce the risk premium for stocks and boost the appeal of risk assets.

The mainland securities regulator’s effort to rein in wild rides on stocks seems to be working after it raised the margin requirement for leveraged stock buying and pledged to curb sharp volatility by clamping down on speculative trading. The 30-day realised volatility of the Hang Seng Index fell to the lowest since August, while that of the CSI 300 gauge approached its August level, according to Bloomberg data.