Lee jumped more than 20 places up the leaderboard with eight birdies and an eagle though could have been even better after also carding a double bogey and two bogeys.
The Australian is one of three players at 7-under and T4, five behind Kang but only one behind second placed Nelly Korda and Marina Alex.
Kang equalled the course record at Sentosa Golf Club’s Tanjong course with a blemish free 64 to go alongside a bogey free opening round of 68.
“The game’s coming easy right now,” Kang said after her round. “There are lots of birdies out there and I’m more focussed on being present and just hitting the shots.
“I’m hitting it well, rolling the putts well so I’m not really worried about the results of how those shots come out.
“It feels like just a cruisy day…hit fairways, hit greens and have a run for a birdie.”
That wasn’t the case for overnight leader Jennifer Song who endured a horror start to her round and did well to hold on for 3-over 75.
After yesterday’s brilliant 65 she opened with a bogey at the first on day two then compounded the error with a quadruple bogey eight.
She fought back with two birdies to make the turn 3-over then posted a double bogey and a bogey against three birdies on the inward half to drop 14 places on the leaderboard.
Su Oh, who opened with 68 to be in a share of fourth place overnight, also found the going tough on day two giving back all her Thursday gains with a 76.
Four bogeys and a double against just two birdies cost her more than 30 places on the leaderboard and she now heads to the weekend 12 shots behind the leader.
Katherine Kirk and Sarah Jane Smith, who were both over par on day one, shot 69 and 70 to climb to T36 and T49 respectively.
SIGNATURE HOLES - 7TH AT BAYVIEW GC SYDNEY:
Want video tips delivered straight to your inbox? Subscribe to iseekgolf.com newsletters.