Australian Smith caught fire from the 12th, rolling in five birdies in six holes to join Spaniard Eugenio Chacarra on seven-under at the storied Hong Kong Golf Club in Fanling.
The pair held a one-stroke lead over Thailand's Gunn Charoenkul and South Korean Jang Yu-bin, who helped his nation claim golfing gold in the team event at the recent Asian Games in Hangzhou, China.
Coming off a break after the LIV event in Saudi Arabia last month, British Open winner Smith returned to action with eight birdies and a solitary bogey on the par-five third.
"Played really solid," said the Australian.
"It was tricky out there today as well, gusty.
"It's a cool track, it's one of my favourites," he added of the golf club's composite course.
"Hopefully we don't get any rain."
Chacarra, who played golf for Oklahoma State University before dropping out to earn millions on the Saudi-backed LIV circuit, teed off soon after sun-rise and held the clubhouse lead after his bogey-free round of seven birdies.
Masters winner Patrick Reed was four shots off the lead on three-under, the American recovering from dropped shots at the third and fifth in his round of 67.
Ireland's Graeme McDowell, another major winner, was also on three-under after a bogey-free day tempered by frustration on the greens.
The Hong Kong Open returned to the Asian Tour schedule this year after last being played in 2020.
Australian Wade Ormsby, the event's last champion and a two-time winner, shot an even-par 70 to be seven behind the leaders.
