The 2022 British Open champion, who started the day tied second, carded six birdies against a lone bogey for a third-round five-under-par 65 at a damp Fanling.
The Australian, attempting to win Asia's oldest professional golf tournament for the first time, was tied with overnight leader Phachara Khongwatmai of Thailand on 16-under overall.
The leading duo was a shot ahead of New Zealander Ben Campbell, with Taiwan's Lee Chieh-po a further shot back in the $2 million Asian Tour International Series event.
Graeme McDowell, the 2010 US Open champion, was lurking in tied seventh, four shots off the pace.
The 30-year-old Smith, one of the biggest names to jump ship to the lucrative Saudi-backed LIV Golf tour, said it had been "a bit of a grind out there today".
"Hopefully it can be stress-free tomorrow.
"I found parts of the course I don't want to see ever again.
"It was a grind, (but) I was happy with the way I hung in there, with the way I was able to make the most of the opportunities that did come," Smith said.
The Hong Kong Open is back for the first time since 2020 following a break because of the Covid-19 pandemic.
